Date of article: December 2006
Last updated: N/A

Investment in instalment warrants by superannuation fund

Up until now, instalment warrants has been determined to entail a borrowing for the purpose of section 67 of the Superannuation Industry (Supervision) Act 1993 (SIS Act) and are therefore not an allowable investments.

This prohibition against borrowing is a long standing rule in superannuation legislation designed to limit risk in superannuation fund investments.

While the Regulators (Commissioner of Taxation responsible for regulating self managed superannuation funds and the Australian Prudential Regulation Authority responsible for regulating other superannuation funds) have determined that investment in these products by superannuation fund is a breach of the SIS Act, the Government recognise that the practice is long standing and widespread. As such, the Government will legislate to allow the continued investment in these products.

In order to avoid any disruption to markets, the Regulators have advised that, pending the law change, superannuation funds investing in traditional instalment warrants will not be considered to be non-complying under the SIS Act merely because of their investment in those products.