Funds cannot borrow to fund pension payments under any circumstances (not within the exceptions allowed under s67 of SIS Act)- underpayment is a breach of the payment standards under the Regulations of the SIS Act.
SUPERANNUATION INDUSTRY (SUPERVISION) ACT 1993 - SECT 67 Borrowing Prohibition
(1) Subject to this section, a trustee of a regulated superannuation fund must not:
(a) borrow money; or
(b) maintain an existing borrowing of money.
Exception--temporary borrowing to pay beneficiary
(2) Subsection (1) does not prohibit a trustee of a regulated superannuation fund from borrowing money if:
(a) the purpose of the borrowing is to enable the trustee to make a payment to a beneficiary which the trustee is required to make by law or by the governing rules and which, apart from the borrowing, the trustee would not be able to make; and
(b) the period of the borrowing does not exceed 90 days; and
(c) if the borrowing were to take place, the total amount borrowed by the trustee would not exceed 10% of the value of the assets of the fund.
(2A) Subsection (1) does not prohibit a trustee of a regulated superannuation fund from borrowing money if:
(a) the purpose of the borrowing is to enable the trustee to make a payment of surcharge or advance instalment which the trustee is required to make under the Superannuation Contributions Tax (Assessment and Collection) Act 1997 and which, apart from the borrowing, the trustee would not be able to make; and
(b) the period of the borrowing does not exceed 90 days; and
(c) if the borrowing were to take place, the total amount borrowed by the trustee would not exceed 10% of the value of the assets of the fund.
Exception--temporary borrowing to cover settlement of securities transactions
(3) Subsection (1) does not prohibit a trustee of a regulated superannuation fund from borrowing money if:
(a) the purpose of the borrowing is to enable the trustee to cover settlement of a transaction for the acquisition of any of the following:
(i) bonds, debentures, stock, bills of exchange or other securities;
(ii) shares in a company;
(iii) units in a unit trust;
(iv) futures contracts;
(v) forward contracts;
(vi) interest rates swap contracts;
(vii) currency swap contracts;
(viii) forward exchange rate contracts;
(ix) forward interest rate contracts;
(x) a right or option in respect of such a security, share, unit, contract or policy;
(xi) any similar financial instrument;
(xii) foreign currency; and
(b) both:
(i) at the time the relevant investment decision was made, it was likely that the borrowing would not be needed; and
(ii) the borrowing is not taken, under a determination made, by legislative instrument, by the Regulator, to be exempt from this paragraph; and
(c) the period of the borrowing does not exceed 7 days; and
(d) if the borrowing were to take place, the total amount borrowed by the trustee would not exceed 10% of the value of the assets of the fund.
Exception--instalment warrants
(4A) Subsection (1) does not prohibit a trustee (the RSF trustee ) of a regulated superannuation fund 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 an asset (the original asset ) other than one the RSF trustee is prohibited by this Act or any other law from acquiring; and
(b) the original asset, or another asset (the replacement ) that:
(i) is an asset replacing the original asset or any other asset that met the conditions in this subparagraph and subparagraph (ii); and
(ii) is not an asset the RSF trustee is prohibited by this Act or any other law from acquiring;
is held on trust so that the RSF trustee acquires a beneficial interest in the original asset or the replacement; and
(c) the RSF trustee has a right to acquire legal ownership of the original asset or the replacement by making one or more payments after acquiring the beneficial interest; and
(d) the rights of the lender against the RSF trustee for default on the borrowing, or on the sum of the borrowing and charges related to the borrowing, are limited to rights relating to the original asset or the replacement; and
(e) if, under the arrangement, the RSF trustee has a right relating to the original asset or the replacement (other than a right described in paragraph (c))--the rights of the lender against the RSF trustee for the RSF trustee's exercise of the RSF trustee's right are limited to rights relating to the original asset or replacement.
Exception--private sector funds
(5) Subsection (1) does not prohibit a trustee of a private sector fund from maintaining an existing borrowing of money if:
(a) the trustee had, at a time before 12 June 1986, borrowed the money in circumstances that did not comply with the standard set out in paragraph 16(1)(b) of the Occupational Superannuation Standards Regulations; and
(b) the maintenance occurs before whichever is the earliest of the following:
(i) the day on which the trustee made such arrangements as were necessary to comply with that standard;
(ii) the day on which the trustee makes such arrangements as are necessary to comply with subsection (1);
(iii) 1 July 1995.
Exception--public sector funds
(6) Subsection (1) does not prohibit the trustee of a public sector fund from maintaining an existing borrowing of money if:
(a) the trustee had, at a time before 2 July 1990, borrowed the money in circumstances that did not comply with the standard set out in paragraph 16(1)(b) of the Occupational Superannuation Standards Regulations; and
(b) the maintenance occurs before whichever is the earliest of the following:
(i) the day on which the trustee made such arrangements as were necessary to comply with that standard;
(ii) the day on which the trustee makes such arrangements as are necessary to comply with subsection (1);
(iii) 1 July 2000.
Civil penalty provision
(7) Subsection (1) is a civil penalty provision as defined by section 193, and Part 21 therefore provides for civil and criminal consequences of contravening, or of being involved in a contravention of, that subsection.
