SUPERANNUATION INDUSTRY (SUPERVISION) AMENDMENT BILL 2010

i Superannuation Industry (Supervision) Amendment Bill 2010 No. , 2010

Contents

1 Short

title

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2 Commencement

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3 Schedule(s)

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Schedule 1--Limited recourse borrowing arrangements

Superannuation Industry (Supervision) Act 1993

Superannuation Industry (Supervision) Amendment Bill 2010 No. , 2010 1

A Bill for an Act to amend the Superannuation

Industry (Supervision) Act 1993, and for related

purposes

The Parliament of Australia enacts:

1 Short title

This Act may be cited as the Superannuation Industry

(Supervision) Amendment Act 2010.

2 Commencement

This Act commences on the day after this Act receives the Royal

Assent.

Limited recourse borrowing arrangements Schedule 1

Superannuation Industry (Supervision) Amendment Bill 2010 No. , 2010 3

Schedule 1--Limited recourse borrowing

arrangements

Superannuation Industry (Supervision) Act 1993

1 Subsection 10(1)

Insert:

acquirable asset has the meaning given by section 67A.

2 Subsection 10(1) (paragraph (a) of the definition of

excluded instalment trust)

Omit "(within the meaning of subsection 66(5))".

3 Subsection 10(1)

Insert:

instalment receipt means an investment under which:

(a) a listed security is held in a trust until the purchase price of

the security is fully paid; and

(b) the security, and property derived from the security, is the

only trust property.

4 Subsection 10(1)

Insert:

listed security has the meaning given by subsection 66(5).

5 Subsection 67(1)

After "this section", insert "and section 67A".

6 At the end of subsection 67(1)

Add:

Note:

Section 67A contains an exception for certain limited recourse

borrowing arrangements.

7 Subsection 67(4A)

Repeal the subsection.

Schedule 1 Limited recourse borrowing arrangements

4 Superannuation Industry (Supervision) Amendment Bill 2010 No. , 2010

8 After section 67

Insert:

67A Limited recourse borrowing arrangements

Exception

(1) Subsection 67(1) does not prohibit a trustee of a regulated

superannuation fund (the RSF trustee) from borrowing money, or

maintaining a borrowing of money, under an arrangement under

which:

(a) the money is or has been applied for the acquisition of a

single acquirable asset, including:

(i) expenses incurred in connection with the borrowing or

acquisition, or in maintaining or repairing the acquirable

asset (but not expenses incurred in improving the

acquirable asset); and

Example: Conveyancing fees, stamp duty, brokerage or loan establishment

costs.

(ii) money applied to refinance a borrowing (including any

accrued interest on a borrowing) to which this

subsection applied (including because of section 67B) in

relation to the single acquirable asset (and no other

acquirable asset); and

(b) the acquirable asset is held on trust so that the RSF trustee

acquires a beneficial interest in the acquirable asset; and

acquirable asset by making one or more payments after

acquiring the beneficial interest; and

(d) the rights of the lender or any other person against the RSF

trustee for, in connection with, or as a result of, (whether

directly or indirectly) default on:

(i) the borrowing; or

(ii) the sum of the borrowing and charges related to the

borrowing;

are limited to rights relating to the acquirable asset; and

Example: Any right of a person to be indemnified by the RSF trustee

because of a personal guarantee given by that person in favour of

the lender is limited to rights relating to the acquirable asset.

Limited recourse borrowing arrangements Schedule 1

Superannuation Industry (Supervision) Amendment Bill 2010 No. , 2010 5

(e) if, under the arrangement, the RSF trustee has a right relating

to the acquirable asset (other than a right described in

paragraph (c))--the rights of the lender or any other person

against the RSF trustee for, in connection with, or as a result

of, (whether directly or indirectly) the RSF trustee's exercise

of the RSF trustee's right are limited to rights relating to the

acquirable asset; and

(f) the acquirable asset is not subject to any charge (including a

mortgage, lien or other encumbrance) except as provided for

in paragraph (d) or (e).

Meaning of acquirable asset

(2) An asset is an acquirable asset if:

(a) the asset is not money (whether Australian currency or

currency of another country); and

(b) neither this Act nor any other law prohibits the RSF trustee

from acquiring the asset.

(3) This section and section 67B apply to a collection of assets in the

same way as they apply to a single asset, if:

(a) the assets in the collection have the same market value as

each other; and

(b) the assets in the collection are identical to each other.

Example: A collection of shares of the same class in a single company.

(4) For the purposes of this section and section 67B, the regulations

may provide that, in prescribed circumstances, an acquirable asset

ceases to be that particular acquirable asset.

RSF trustee

(5) Paragraphs (1)(d) and (e) do not apply to a right of:

(a) a member of the regulated superannuation fund; or

(b) another trustee of the regulated superannuation fund;

to damages against the RSF trustee for a breach by the RSF trustee

of any of the RSF trustee's duties as trustee.

(6) A reference in paragraph (1)(d) or (e) (but not in subsection (5)) to

a right of any person against the RSF trustee includes a reference to

a right of a person who is the RSF trustee, if the person holds the

right in another capacity.

Schedule 1 Limited recourse borrowing arrangements

6 Superannuation Industry (Supervision) Amendment Bill 2010 No. , 2010

67B Limited recourse borrowing arrangements--replacement assets

(1) Subsection (2) applies to:

(a) a reference in paragraph 67A(1)(b), (c), (d), (e) or (f) to an

acquirable asset (the original asset); or

(b) a reference in subsection 71(8) to an acquirable asset (the

original asset) mentioned in paragraph 67A(1)(b);

(including a reference resulting from a previous application of

subsection (2) of this section).

(2) Treat the reference as being a reference to another single

acquirable asset (the replacement asset) if:

(a) the replacement asset replaces the original asset; and

(b) subsection (3), (4), (5), (6), (7) or (8) applies.

(3) This subsection applies if:

(a) the original asset consists of:

(i) a share in a company, or a collection of shares in a

company; or

(ii) a unit in a unit trust, or a collection of units in a unit

trust; and

(b) the replacement asset consists of:

(i) a share in that company, or a collection of shares in that

company; or

(ii) a unit in that unit trust, or a collection of units in that

unit trust; and

replacement asset have the same market value.

(4) This subsection applies if:

(a) the original asset consists of an instalment receipt that

confers a beneficial interest in:

(i) a share in a company; or

(ii) a collection of shares in a company; and

(b) the replacement asset consists of that share or collection.

(5) This subsection applies if:

(a) the original asset consists of:

(i) a share in a company, or a collection of shares in a

company; or

Limited recourse borrowing arrangements Schedule 1

Superannuation Industry (Supervision) Amendment Bill 2010 No. , 2010 7

(ii) a unit in a unit trust, or a collection of units in a unit

trust; and

(b) the replacement asset consists of:

(i) a share in another company, or a collection of shares in

another company; or

(ii) a unit in another unit trust, or a collection of units in

another unit trust; and

demerger or restructure of the company or unit trust

mentioned in paragraph (a).

(6) This subsection applies if:

(a) the original asset consists of a share in a company, or a

collection of shares in a company; and

(b) the replacement asset consists of a stapled security, or a

collection of stapled securities; and

single collection of shares of the same class, stapled together

with a single unit, or a single collection of units of the same

class, in a unit trust; and

(d) the replacement occurs under a scheme of arrangement of the

company.

(7) This subsection applies if:

(a) the original asset consists of a unit in a unit trust, or a

collection of units in a unit trust; and

(b) the replacement asset consists of a unit in that unit trust, or a

collection of units in that unit trust; and

discretion granted under the trust deed of that unit trust to the

trustee of that unit trust.

(8) This subsection applies in the circumstances (if any) prescribed by

the regulations for the purposes of this subsection.

9 Paragraph 71(1)(g)

Omit "(within the meaning of subsection 66(5))".

10 Paragraph 71(8)(b)

Omit "paragraph 67(4A)(b)", substitute "paragraph 67A(1)(b)".

Schedule 1 Limited recourse borrowing arrangements

8 Superannuation Industry (Supervision) Amendment Bill 2010 No. , 2010

11 Paragraph 71(8)(b)

Omit "subsection 67(4A)", substitute "subsection 67A(1)".

12 Paragraph 71(8)(c)

Omit "original asset or replacement described in that subsection",

substitute "acquirable asset mentioned in that paragraph".

13 Subsection 71(8)

Omit "if the original asset or replacement described in subsection

67(4A)", substitute "if the acquirable asset mentioned in that

paragraph".

14 Application provision

The amendments made by this Schedule apply to an arrangement

entered into on or after the commencement of this item (including an

arrangement that is a refinancing of a borrowing of money under an

arrangement entered into before, on or after that commencement).

Commonwealth of Australia Bills

SUPERANNUATION INDUSTRY (SUPERVISION) AMENDMENT BILL 2010