Gresham Partners has designed a solution that allows superannuants to make a significant contribution to their fund before the 1 July super changes come into force.
The Gresham Super Solution (GSS) allows members to maximise their balance by contributing $540,000 to their SMSF without needing to have the cash available now.
The arrangement results in repayments of principal and interest flowing into the SMSF, which can then be used to fund limited recourse borrowing arrangement debt arrangements, if required, or invested into other assets.
“We identified the issue of people who wouldn’t be able to make anymore NCCs after 1 July, so we wanted to help them fund their contributions before the change happens,” Gresham executive director Stephen O’Shaughnessy told selfmanagedsuper.
“As a structure it’s an unsecured loan, repayable quarterly in equal amounts, which individuals then repay and effectively contribute to their super fund over time, enabling them to put more into super if they don’t have the liquidity before 30 June.
“It’s really for people with SMSF balances in excess of $1.2 million and who expect to continue to be in the higher personal income tax brackets, however, individuals should consider if it’s appropriate for them having regard to their own financial situation and needs, and consult with a financial adviser.”
O’Shaughnessy highlighted the structure was approved by the regulator.
“ATO has provided a letter of comfort that confirms our product complies with the provisions of the Superannuation Industry (Supervision) Act,” he said.
“We stress the difference of this structure because it’s different to borrowing $540,000 and putting it into your super fund as you pay interest to a third party – the interest, net of fees, goes into your fund.
“What this product does is effectively extend your cap to $2.1 million and allows you to pay the amount of money over time over the length of the loan.
“It’s very much a structured product that enables you to continue paying money into your super fund, even if you’re over the $1.6 million after 1 July.”
Another important aspect of the GSS is that the loan is taken out by the individual and not the SMSF.
“It’s like the individual still gets to make NCCs, but it’s just in the form of principal and net interest payments,” O’Shaughnessy said.
He also stressed the product was not appropriate for all SMSFs.
“It is important to note we are not giving general or personal advice in relation to superannuation nor recommending you contribute more to your superannuation,” he said.
“Before taking action you should consider whether the GSS is appropriate for you, having regard to your own financial situation and needs and consult with a financial adviser.
“As with all new products, it is important that you read the information memorandum for the Gresham product and understand the detailed loan and unit structure.”
He encouraged SMSFs to seek advice if they were uncertain.
“There is a bit of complexity with this, so we’ve found it quite good to work with intermediaries,” he noted.
“This is more of a structured solution that allows someone to keep making NCCs, they’re just in the form of a principal and interest on a loan via the structure we’ve come up with.
“As part of our application process, we give you a transfer form to transfer the units to the SMSF, so there’s one piece of paperwork that has to happen here to make the NCC and we do all the servicing – from an SMSF perspective, we will provide the usual reporting as you would get with your other investments as the SMSF is a unitholder.”
