Self-managed superannuation funds will be among the biggest buyers of corporate bonds issued under new laws designed to bolster the fledgling retail corporate debt market, Treasury says.
In an attempt to give people a greater opportunity to invest in fixed-income assets, the government plans to make it simpler and cheaper for big companies to sell corporate bonds to retail investors.
With Parliament now assessing the proposed legislation, Dr Richard Sandlant, from Treasury's retail investor division, said on Monday that the products would be particularly appealing to older investors and trustees in the rapidly growing self-managed super sector.
Bonds pay investors a fixed return and are typically more stable than shares - which are the biggest asset in most superannuation portfolios.
Debt securities accounted for only 0.7 per cent of self-managed super funds' assets, he said, citing figures from the Tax Office.
"Australians are relatively active equity investors but would benefit from being able to diversify into longer-term, lower risk and less volatile income streams," Dr Sandlant said at a parliamentary hearing.
"With Australians living longer, simple corporate bonds provide an appropriate alternative to managing longevity risk, which is of particular interest to SMSF trustees."
The government's push to bolster the corporate bond market comes after experts, including former Treasury boss Ken Henry, raised the alarm over the heavy weighting to shares in the $1.5 trillion super system.
The changes involve lowering the disclosure requirements for companies issuing corporate bonds and easing the liability on directors, but Dr Sandlant argued investors would still have adequate legal rights.
In an attempt to limit the changes to lower-risk products, it is likely that only the biggest 200 companies will be able to issue bonds with the benefit of the new rules.
The rules also will only apply to bonds with a face value of $1000 or less.
The draft legislation is before Parliament and currently the subject of an inquiry by the parliamentary joint committee on corporations and financial services.
It comes as the Australian Securities Exchange prepares to begin trading in Commonwealth government bonds in coming months - seen as a vital first step to establishing a larger retail corporate bond market.
Banks and other big issuers of bonds have backed the changes, which are also intended to lower the nation's reliance on volatile wholesale funding markets.