Today the Superannuation Legislation Amendment Bill (No.4) 1999 was introduced into the House of Representatives, to give effect to the new investment rules for superannuation funds.
The Government has made a number of amendments to address issues raised during consultation on the exposure draft of the legislation.
In particular, small superannuation funds will be allowed to make additional investments (and loans) into related trusts and companies until the end of 30 June 2009, up to the amount of any debt outstanding at 12 May 1998. This change has been made to address concerns that some related entities may otherwise have had difficulty in repaying existing debt. A small fund may elect to use this transitional provision as an alternative to previously announced transitional arrangements. Further details are set out in the Attachment.
The previously announced transitional arrangement for reinvestment of earnings will be extended to 30 June 2009 (rather than 30 June 2005).
In addition, the ‘transition period’ will be extended so that investments and loans made between 12 May 1998 and when the legislation receives Royal Assent will not be treated as in-house assets until 1 July 2001 (if they would not previously have been in-house assets). Assets leased before the date of Royal Assent will also be covered by this transitional provision. Previously, the transition period had extended only until the introduction of the legislation. This will provide greater flexibility in the transitional arrangements.
To provide greater consistency between the transitional arrangements, the provision allowing additional payments on partly paid shares and units will have a cut off date of 30 June 2009.
The Government is also providing greater flexibility in the use of the business real property exceptions available to small superannuation funds. The business real property exceptions will now be available for real property used wholly and exclusively in one or more businesses, regardless of who is conducting the business. For instance, this would accommodate the situation where a small superannuation fund leases a business property to a related party who sub-leases part of the property to another business.
The provisions have also been amended to provide greater flexibility for the business real property exceptions to be used for farm properties, by ensuring that a property containing a farm house can qualify for the exception.
The business real property exceptions allow a small superannuation fund to invest up to 100 per cent of its assets in acquiring business real property from a related party and also allows up to 100 per cent of its assets to be used in business real property leased to a related party.
The Bill and Explanatory Memorandum may be found on the Treasury internet site at /wwwtsy/publications/Bills,ActsAndLegislation/SuperannuationLegislationAmendmentBill/No4-1999/index.asphttp://www.treasury.gov.au/publications/Bills,ActsAndLegislation/SuperannuationLegislationAmendmentBill/No4-1999/index.asp">http://www.treasury.gov.au.
CANBERRA
11 August 1999
| Media contacts: | Matthew Guy Assistant Treasurer’s Office (02) 6277 7360 |
Geoff Painton Treasury (02) 6263 3205 |
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ATTACHMENT TRANSITIONAL ARRANGEMENT FOR REPAYMENT OF DEBT The Superannuation Legislation Amendment Bill (No. 4) 1999 contains a provision to allow a superannuation fund with fewer than 5 members to make additional investments in, or loans to, a unit trust or company between 7.30 p.m. 12 May 1998 and before 1 July 2009. This is in section 71E in the Bill. This is available if the superannuation fund had initially made an investment in or a loan to the unit trust or company before 7.30 p.m 12 May 1998 (and the investment or loan was not an in-house asset at that time). Under this provision, the investments or loans made after 7.30 p.m. 12 May 1998 and before 1 July 2009 will not be treated as in-house assets if the sum of these investments and loans does not exceed the entity’s debt (to entities other than the superannuation fund) at 7.30 p.m. 12 May 1998. Amounts that do not exceed the debt limit will be grandfathered (that is, permanently exempted from being in-house assets). This transitional provision will apply only if the trustee of the fund makes a written election no later than 12 months after the Bill receives Royal Assent (or later if allowed by regulations). If the election is made, then this transitional provision will apply to all of the investments and loans made by the superannuation fund to that entity after 7.30 p.m. 12 May 1998 and before 1 July 2009 (including those made before the election). If an election is made, the transitional arrangements under section 71A and section 71D will not apply to investments in and loans to that entity made after 7.30 p.m. 12 May 1998. That is, the debt repayment provision is an alternative to using the transitional arrangements for payments on partly paid shares and units (under section 71A), for investments and loans under pre-12 May 1998 contracts (under section 71A), and for reinvestment of earnings (under section 71D). Investments and loans made by the superannuation fund before 7.30 p.m. 12 May 1998 will continue to be grandfathered and do not count against the debt limit. The following example illustrates the operation of the new transitional provision. Superannuation fund Z invested in unit trust Y before 12 May 1998 (by acquiring units in the trust). The unit trust borrowed from a bank and $100,000 was outstanding at 12 May 1998. Trust Y is a related trust of fund Z. The superannuation fund makes a further investment into the unit trust of $50,000 in December 1998. In March 2000, the trustee of fund Z makes an election that section 71E will apply to investments by fund Z into trust Y after 12 May 1998. In April 1999, the fund makes a further investment of $50,000. Because an election has been made, all investments by fund Z into trust Y that are made between 7.30 p.m. 12 May 1998 and 1 July 2009, count against the $100,000 debt limit. The investments made in December 1998 and April 1999 will not be counted as in-house assets because they fall within the $100,000 limit. Any further investment by fund Z into trust Y will be in excess of the $100,000 limit and will therefore count as an in-house asset. Pro rata arrangements will apply if an investment partly exceeds the debt limit. |