International Law

Superannuation fund borrowing rules change

By David Jacobson

The Superannuation Industry (Supervision) Amendment Bill 2010, if passed, will change the conditions on which superannuation funds can borrow on a limited recourse basis for investment purposes.

The Bil will replace the existing Section 67(4A) and replace it with Sections 67A and 67B the effect of which will be:

• each borrowing is permitted only in respect of a single asset (excluding money) or in prescribed circumstances, a
  collection of assets which are identical and are treated as a single asset (eg a collection of shares of the same type in a single company).

  An example of assets for which a single borrowing would not be permitted is a collection of buildings each under separate strata title, irrespective of whether the buildings are substantially the same at the time of acquisition.

  In the case of the purchase of real property for example, a single title for land and the accompanying house on it would be considered a single acquirable asset, but additional items such as furnishings would not be allowed to be purchased through the same limited recourse borrowing arrangement.;

• the recourse of the lender and of any other person against the superannuation fund trustee for default on the borrowing is
  limited to rights relating to the acquirable asset;
• the asset within the arrangement can only be replaced in prescribed circumstances that arise from owning the original asset.

Full post as published by Australian Regulatory Compliance Review on May 30, 2010 (boomark / email).