Patent AU-2014101272-A4 (AU)
Title: Geared Super Construction Finance
Inventor: DUNCAN PAUL
IPC: G06Q40/00
Filed: 2014-10-19
Granted: 2015-02-05
Abstract: Abstract - Geared Super Construction Finance Trustees of Regulated Superannuation Funds under the Superannuation Industry (Supervision) Act 1993 ('the Act'), more commonly known as Self-Managed Superannuation Funds ('SMSF') are in breach of s67A of the Act in the circumstance where a borrowing arrangement of the SMSF is used to purchase and settle vacant land and is also sufficient and used to develop real property on that land. Additionally, the s67A prohibition on 'improvement of assets', s67B restrictions on 'replacement of assets' and the applications in Australian Tax Office ruling SMSFR2012/1 taken together, effectively prohibit any other borrowing arrangement for an SMSF intending to purchase vacant land and develop real property on that land. It also effectively prohibits gearing equity in an existing real property for additional developments. The blanket prohibition of SMSF borrowing in s67(1) and the tightly qualified exemptions in s67A on borrowing arrangements for a 'single acquirable asset' with limited recourse to that asset in the event of default, has the effect of reducing the commercial risk to the SMSF's other assets. The Geared Super Property Fund ('GSPF') is a managed investment scheme, manufactured specifically to provide an investment pathway for SMSF trustees to develop real property on newly purchased vacant land without breaching the Act or increasing commercial risk to the SMSF's other assets. GSPF provides a 'siloed' unit class for each SMSF depositing cash equity. The unit class holds the same number of units at par value in a sub trust with a separate trustee. The sub trust in turn purchases land and develops real property using the deposited cash equity and GSPF construction borrowing arrangements. Once the development is completed the SMSF can withdraw from GSPF and request the transfer of the sub trust and its real property assets to a new bare trustee of the SMSF with new borrowing arrangements that satisfy s67(1), s67A, s67B and any other relevant sections of the Act. GSPF simultaneously redeems the units in the sub trust and cancels the identical units in the siloed unit class completing the transfer. Alternatively the SMSF can choose to remain invested in GSPF after completion of the development. GSPF provides ongoing borrowing arrangements and property management services for the sub trust assets while ever the SMSF holds units in the siloed unit class. The sub trust assets therefore continue to be held by the sub trust allowing the equity in existing real property to be geared for additional developments, effectively accelerating a property portfolio which is completely managed for the SMSF by GSPF. Drawing - Geared Super Construction Finance An SMSF simply acquires a 'unit class' in the Geared Super Property Fund by completing the application form and Construction - - -.. Trustee depositing the cash equity component. Finance Provider Geared The Trustee for the Geared Super Property Fund arranges Super a construction loan component and contracts with the Property builder that introduced the SMSF for a selected property. Fund The completed property can he transferred to the SMSF bare trustee or remain with unit class trustee ongoing. - --- - - - Unit Class #1 Assets Construction Loan 5MSFs SMSF#1 Unit Class #1 #1- (Beneficial SMSF Equity (Legal Owner) Owner) Truste . .Builder TTrustee Unit Class #2 Assets Construction Loan SMSF SMSF #2 Unit Class #2 (Beneficial SMSF Equity (Legal Owner) Owner) -uilde TrusteeTrustee Unit Class #3 Assets Construction Loan SMSF S SF .. Unit Class #3 - ------------ B rnecf tc SM Unt er (Beneficial SMSF Equity(LglO er i Legal ) ue wner) -- Bi Trustee Trustee Page 1 of 1