Govt to legitimise SMSF instalment warrant investments

The Federal Government is moving to ensure that self-managed superannuation funds can continue to invest in instalment warrants despite an adverse regulatory interpretation by both the Australian Taxation Office (ATO) and the Australian Prudential Regulation Authority (APRA).

Assistant Treasurer Peter Dutton said the Government would be acting to allow superannuation funds to continue to invest in the instalment warrants “consistent with long-standing administrative practice”.

Dutton said that while APRA and the ATO had concluded that instalment warrants entailed borrowing and were inconsistent with the terms of the Superannuation Industry (Supervision) Act (SIS Act), the practice of investment in such products was long-standing, widespread and represented a significant proportion of the instalment warrant market.

“The Government will legislate to allow longstanding practice to continue, following consultation with the industry regarding the precise scope of amendments to the SIS Act,” he said.

Dutton said that in order to avoid any disruption to markets, the ATO and APRA had advised that, pending the law change, superannuation funds investing in traditional instalment warrants would not be considered to be non-complying under the SIS Act merely because of their investment in those products.

However, he said fund investment in instalment warrants would still have to comply with other superannuation rules and trustees would still be required to demonstrate the appropriateness of including instalment warrants in their investment strategy.