The Assistant Treasurer, Senator Rod Kemp, welcomed the passage of the Superannuation Legislation Amendment Bill (no. 4) through the Senate today.
The Bill gives effect to the announcement in the 1998-99 Budget to amend the investment rules for superannuation funds. The aim of the Bill is to reduce risk to superannuation savings and to ensure that superannuation is preserved for the intended purpose of retirement income. In doing so this Bill sets a sound framework for superannuation savings for decades to come.
The Bill also provides a significant concession to assist small superannuation funds to acquire business real property. Small superannuation funds will now be able to use up to 100 per cent of their assets to acquire business real property from members and to lease such property back to members. This measure has been warmly and widely welcomed by business and other groups.
In response to some of the issues raised in the Report by the Senate Select Committee on Superannuation and Financial Services the Government has made two significant amendments to improve the operation of the Bill.
The first amendment will allow small superannuation funds to invest in certain, non-geared, unit trusts or companies. This will allow a small superannuation fund to jointly own business real property with a related party. The requirements will include:
- the company or trust does not borrow;
- it does not invest in or loan money to individuals or other entities (other than deposits with financial institutions);
- it has not acquired assets from a related party of the superannuation fund other than business real property;
- it does not lease assets to related parties (or enter into lease arrangements), other than a legally binding lease of business real property to a related party on an arm’s length basis; and
- it conducts all other transactions on an arm’s length basis.
The Government will consult with accounting and other industry bodies in developing a definition of non-geared company or trust that meets these requirements.
The second amendment ensures that the changes to the in-house provisions will apply only from the date of the introduction of the legislation (11 August 1999). The change that allows a small superannuation fund to use 100 per cent of its assets to acquire business real property from a related party will continue to apply from 12 May 1998.
The Government also intends to consult further with industry groups to examine whether the business real property exemption should cover undeveloped commercial land that is not being used in a business. In this regard, the Bill provides the regulators with the power to provide additional exceptions to Section 66 of the Superannuation Industry Supervision Act 1993.
CANBERRA
8 December 1999
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Treasury Contact: Geoff Painton (02) 6263 3205