Fund manager Gresham Partners has launched a loan product, the Gresham Superannuation Solution, offering finance to superannuation fund members who want to make a significant contribution to their fund ahead of rule changes that take effect on July 1.
Gresham will lend up to $540,000, allowing super fund members to make a non-concessional contribution before the rule change takes effect.
Under the current superannuation rules, people over 50 can contribute $35,000 of concessional contributions each year and people under 50 can contribute $30,000 a year.
Any member can make a non-concessional contribution of $180,000, with the ability to gain access to future year caps by making three times the annual contribution cap in one year ($540,000).
From July 1, the concessional cap falls to $25,000 a year for super fund members of any age and the non-concessional cap falls to $100,000.
Importantly, people whose superannuation account balance is at the $1.6 million transfer balance cap or above at June 30 will have any future non-concessional contributions treated as excess contributions and be taxed at the top marginal rate.
What this means is that investors with large superannuation balances have their last opportunity to make a significant non-concessional contribution to super.
A borrower using the Gresham loan would pay an upfront fee of $3,000 for the loan and, at a fixed interest rate of six per cent, an annual loan repayment of $125,407 over a five-year term. If the loan is taken out for a 10-year term the annual repayment would be $71,773.
According to Gresham projections, the financing arrangement would benefit borrowers by around $245,000 over 15 years after all expenses, assuming the member is in the top tax bracket and with a assumed six per cent annual return on investments funded with the loan, versus the alternative of investing outside super.
Under the terms of the loan, the funds must be invested in a unit trust, the Gresham Investment Super Trust, which can be transferred into the borrower’s super fund.
Gresham executive director Stephen O’Shaughnessy says the ATO has issued a comfort letter (not a product ruling) saying that the product complies with superannuation legislation.
O’Shaughnessy says that because of the structure of the finance arrangement – the obligation to invest the borrowed funds in the GIST – there may have been some sensitivities around related party transaction and in-house asset rules.
He says the interest rate may vary, depending on an assessment of the borrower, but will be fixed for the term. Gresham will fund on five, seven or 10-year terms.
O’Shaughnessy says: “It is important to note we are not giving general or personal advice in relation to superannuation or recommending you contribute more to your superannuation.”