Treasury has released an exposure draft of amendments to the Corporations Regulations 2001 to provide that certain borrowing arrangements by superannuation fund trustees permitted by the Superannuation Industry (Supervision) Act 1993 (SIS Act) are financial products under the Corporations Act 2001.
Limited recourse borrowing arrangements are permitted under subsections 67A and 67B of the SIS Act.
There is currently a conflict between the SIS Act and the National Credit Code in respect of super fund loans to acquire a residential investment property where the borrowers are natural persons and the property trustee giving the mortgage is a different natural person.
The proposed Regulations amend the Corporations Regulations 2001 to provide that:
- limited recourse borrowing arrangements are financial products under the Corporations Act when acquired by superannuation funds;
- limited recourse borrowing arrangements are not a credit facility under the Corporations Act when acquired by superannuation funds; and
- an Australian Financial Services Licence covering securities or derivatives is taken to also cover limited recourse borrowing arrangements.
Financial institutions who currently provide SMSF loans may need to vary their AFSL licence if they are not currently authorised to issue securities or derivatives.
