Superannuation Industry (Supervision) Act 1993
The Superannuation Industry (Supervision) Act 1993 (SIS Act) is the principal legislation regulating the superannuation industry in Australia. The Act establishes the legal framework for the operation of superannuation funds, including their governance, investment, and member protection. The Act gives effect to Australia’s compulsory superannuation guarantee system (introduced in 1992) by requiring employers to make contributions to complying superannuation funds on behalf of their employees. The Act imposes extensive duties on fund trustees, including the sole purpose test (funds must be maintained solely for retirement benefits), covenants requiring trustees to act in the best interests of members, and restrictions on investment and borrowing.
Legal area: Banking and financial law regulates financial institutions, markets, superannuation, and monetary policy.
Year enacted: 1993
Full text: https://www.legislation.gov.au/Details/C1993A00078
Key Provisions
- Section 62: Sole purpose test (funds held solely for retirement benefits)
- Part 6: Trustee duties and covenants (best interests, conflicts, care and diligence)
- Section 65: Lending to members or relatives prohibited
- Section 67: Borrowing restrictions (limited recourse borrowing arrangements)
- Part 9: Investment rules (arm’s length, diversification, in-house assets limits)
- Part 15: Reporting to members and regulators
- Section 291: Civil and criminal penalties for contraventions
Significance
The SIS Act is fundamental to Australia’s $3.5 trillion superannuation system, one of the largest pools of retirement savings globally. The Act’s sole purpose test ensures that superannuation benefits are preserved for retirement. The trustee covenants impose fiduciary standards on fund managers. The Act has been substantially amended to strengthen governance (2012 Stronger Super reforms, 2021 Your Future, Your Super reforms), including annual performance tests for MySuper products and stapling of accounts.