SuperGear
ACCELERATE YOUR WEALTH
A LENDING SOLUTION FOR SELF MANAGED SUPER FUNDS (SMSF)
PRODUCT INFORMATION BOOKLET | Issue date 27 January 2015
Issued by Commonwealth Bank of Australia
ABN 48 123 123 124
Important Notes and Disclaimer
Issued by Commonwealth Bank of Australia
ABN 48 123 123 124
Ground Floor, Darling Park 1, 201 Sussex St
Sydney NSW 2000
Date of Issue: 27 January 2015
The latest version of this Product Information Booklet (PIB) can be found on the Commonwealth Bank website at www.commbank.com.au/supergear
Any updated PIB versions will be published on the Commonwealth Bank website. Alternatively, you can call a Commonwealth Bank Relationship
Manager on 13 1998 at any time to obtain the latest PIB and be informed about any recent changes.
Important Information
The SuperGear lending facility is not a financial product as defined and described within Chapter 7 of the Corporations Act 2001 (Cwlth) and
the information in this booklet is not financial product advice.
The information contained in this booklet does not take into account the investment objectives, financial situation and needs of any particular individual
or self managed superannuation fund. Because of that, you should assess with the help of legal, financial and taxation advice, whether
a SuperGear lending facility is appropriate in light of your own circumstances before acting on the information in this booklet. Information on taxation
is based on the Commonwealth Bank’s understanding of current laws and their interpretation and should be confirmed by your taxation adviser.
Only investors who fully understand the risks associated with gearing into investments should apply. All applications for the SuperGear lending facility
are subject to the Commonwealth Bank’s credit approval process. Fees and charges apply.
References in this PIB to specific lending examples are for illustrative purposes only and are not provided as product advice. You should consider all
the information within this booklet before making any decision to apply for a SuperGear lending facility. Before making any financial decision regarding
your investments you should seek independent advice.
Applications to commence a SuperGear lending facility are only available to persons receiving the PIB (whether in paper or electronic form) within
Australia who are Australian residents and who provide an Australian address for service when making their application to commence a SuperGear
lending facility. SuperGear applications which do not specify an Australian address for service or which are accompanied by payment drawn from
a foreign bank account may be rejected and returned.
This PIB is not an offer or invitation in relation to a loan. Applications for a SuperGear lending facility can be made to the Commonwealth Bank and
may be accepted or rejected by the Commonwealth Bank in its absolute discretion.
The information in this PIB is summary in nature and does not contain a complete description of the terms and conditions of the SuperGear lending
facility. The terms and conditions of the SuperGear lending facility will be contained in the SuperGear Agreements and provided to you if we issue you
a SuperGear offer pack. You must ensure you read, understand and obtain legal advice on those documents in full. Your SuperGear lending facility will
be governed by the SuperGear Agreements and not information in this PIB.
Disclaimer
You should read this PIB and the SuperGear Agreements in full before deciding whether to use the arrangements offered by SuperGear to invest in
real property having regard to your own investment objectives and financial circumstances, and the merits and risks involved in the investment.
You should seek your own professional advice in assessing the appropriateness of using the arrangements offered by SuperGear to invest in
real property.
The information in this PIB:
– is not financial product advice and does not take into account the investment objectives, financial situation, tax position or particular needs of
an individual investor; and
– has been prepared by us on the basis of our understanding of the law as at 27 January 2015.
The Commonwealth Bank reserves the right to change the terms and features of SuperGear at any time, including as a consequence of any change
in the law which has a material adverse impact on SuperGear or the Commonwealth Bank. In some circumstances this may include requiring early
repayment of SuperGear facilities.
Some words and expressions in the PIB have defined meanings which are set out in the Glossary contained in section 1.10.
References in these Important Notes and Disclaimer to ‘you’, ‘your’, and ‘investor’ are references either to self managed superannuation fund trustees
or fund members, or both, as the context requires.
Neither the Commonwealth Bank, Premium Custody Services Pty Ltd or any other person recommends, warrants, guarantees or underwrites the
performance of or return on any investment acquired using SuperGear. Premium Custody Services Pty Ltd is a wholly owned but non guaranteed
subsidiary of the Commonwealth Bank of Australia.
1 Table of Contents
Important Notes and Disclaimer
2
Part 1 – SuperGear Overview
2
1.1
What is SuperGear?
2
1.2
Who is SuperGear available to?
3 1.3
Key Features
7
1.4
Principal Benefits
8
1.5
Principal Risks
11
1.6
How does SuperGear work?
11
1.6.1Structure
13
1.6.2
13
1.6.2.1
Getting Prepared
14
1.6.2.2
Funding Requirement Review and Approval
15
1.6.2.3
Finalise Investigations, Acquire Property and
Appoint Property Manager
Engage SuperGear
Starting and Maintaining SuperGear
16
17
1.6.2.5
Lifecycle Management Requirements
for SuperGear
18
1.6.2.6
Conclusion of the SuperGear Lending Facility
18
1.6.2.7
19
1.7
Applicable Interest Rates, Fees and Taxes
21
1.8
Illustrative Examples
23
1.9
General Matters
23
1.9.1
23
1.9.2
23
1.9.3Disclosures
24
1.10
1.6.2.4
Review Events
Code of Banking Practice
What if I have any complaints concerning
SuperGear?
Glossary
25 Part 2 – SuperGear Application
25
2.1
Application Process – Next Steps
26
2.2
SuperGear Risk Disclosure & Advice Form
29
2.3
Commonwealth Bank Services
2
Part 1 – SuperGear Overview
1.1 What is SuperGear?
SuperGear is a complete lending solution that allows Self Managed Super Fund (SMSF) trustees to purchase an
investment property partly funded by a limited recourse loan. It gives you the opportunity to use the tax concessional
superannuation environment currently applicable to your complying SMSF.
Legal title to the investment asset is separately held on trust for your SMSF by the Custodian for the duration of the loan
term, subject to a mortgage in favour of the Commonwealth Bank of Australia (‘the Bank’).
Your fund’s beneficial interest brings with it the benefits and obligations associated with the investment asset through
the loan term, including net income and capital growth. You also have the right to make a Final Payment at any time to
complete your borrowing obligations, upon which your fund can obtain legal title to the investment property.
1.2 Who is SuperGear available to?
SuperGear is currently only available to complying SMSFs with at least $200,000 in net assets. All SMSF members must
also be in Accumulation not Pension Phase when the SuperGear loan commences. Limited exceptions may be assessed
on a case-by-case basis, however all references within the Product Information Booklet (PIB) assume all SMSF members
are in Accumulation Phase when the SuperGear loan commences.
SMSFs are a type of superannuation fund effectively enabling its members to have greater control of their own
superannuation investment portfolio, in-line with their fund’s authorised investment strategy.
To be a complying SMSF for the purposes of the Income Tax Assessment Act 1936 and Income Tax Assessment
Act 1997, a SMSF must first elect and receive approval to be a regulated superannuation fund and abide by the
Superannuation Industry (Supervision) Act 1993 (Cwlth) (‘SIS Act’) on an ongoing basis. In general, the SIS Act requires
the following criteria to be met for a superannuation fund to be a SMSF (with a few exceptions):
• the fund has a maximum of four members, all of which are individuals;
• no member of the fund is an employee of another member of the fund, unless they are related;
• each eligible member is in the case of a corporate trustee a director of the trustee company; and
• no corporate trustee, or director of the trustee company receives any remuneration for their services
as trustee or director.
For single member SMSFs with a corporate trustee, the member can be a sole director, or have a maximum of two
directors where one director is the member and the other director is either related to the member or the member is not
an employee of the other director of the corporate trustee.
SMSFs are regulated by the Australian Taxation Office. All other superannuation funds are regulated by
the Australian Prudential Regulation Authority.
3
1.3 Key Features
The table below provides a summary of the key features applicable to the SuperGear lending facility.
Property Related Features and Conditions
Acquisition
Real Property can be acquired at auction or by private treaty sale provided it is on commercial terms.
Our approval is required before purchase and the purchase transaction must be carried out in-line with our
Property Purchase & Sale Instructions which will be supplied as part of your loan application.
Ownership
• The SMSF trustee receives the beneficial interest and obligations associated with the investment
property, including the net lease income and capital growth;
• Legal title to the investment property is held by the Custodian – Premium Custody Services Pty Ltd or a
private custodian set up by you – for the duration of the SuperGear loan term;
• The SMSF trustee is responsible for all outgoings and liabilities of the investment property;
• Upon the Final Payment being made and the Commonwealth Bank discharging the mortgage, legal title
to the investment property can be transferred by the Custodian to the SMSF trustee or to
a separate custodian nominated by the SMSF trustee.
Insurance
Full property and public liability insurance cover from an insurer authorised by the Commonwealth Bank
is mandatory for the duration of the loan term.
Property Management
When utilising Premium Custody Services Pty Ltd as the Custodian, the investment property must be
managed at all times by a property manager selected by the SMSF trustee, approved by the Custodian
and appointed under a SuperGear Property Management Agreement. Additional property management
options are available where one or more SMSF members plan to be the principal Lessee(s) of business real
property for a defined period, subject to approval by the Custodian and the Bank.
Lease
The investment property must be leased or available for lease on commercial terms at all times.
Net Lease Income
Net lease income flowing from the investment property is directed from the proceeds account maintained
by the property manager toward a nominated Commonwealth Bank account associated with the loan,
to help service the outstanding minimum monthly loan and fee repayment amounts as and when they fall
due and payable. Excess net lease income may be directed toward a separate account maintained by
the SMSF trustee.
4
Part 1 – SuperGear Overview
Loan Features and Conditions
Acceptable Security
Real property purchased on commercial terms for investment purposes only, including Residential,
Rural or Commercial investment property located within Australia which your fund is otherwise permitted
to acquire under superannuation legislation, subject to approval by the Commonwealth Bank on
a case-by-case basis.
One loan will apply per investment property.
Maximum Loan to
Valuation Ratio (LVR)
• Residential: 80%
• Rural: 60%
• Commercial: 65% (70% LVR considered where SMSF will be geared at less than 50%)
Loan Amount
Maximum Loan Term
• $200,000 minimum
• Residential: 30 years
• Rural: 15 years
• Commercial: 15 years
Interest Rate Type
Fixed or Variable.
Interest Rate %
Standard Commonwealth Bank Commercial Lending pricing terms apply. Please contact the
Commonwealth Bank on 13 1998 or refer to www.commbank.com.au/supergear for further details.
Repayment
Principal and Interest paid monthly in arrears.
Interest only payment terms up to 5 years available.
Loan Re-Draws,
Top-Ups and
Progressive Draw
Downs
Are unavailable.
Re-Financing
Re-financing is permitted
Funding Approval and Ongoing Funding Conditions
Minimum Fund Size
The SMSF must have at least $200,000 in net assets. Above this threshold the net asset requirement of
the SMSF will depend on the specific terms of each proposed transaction and the capacity of the SMSF to
meet all SuperGear funding approval criteria.
Accumulation Phase
Requirement
All SMSF members must be in Accumulation not Pension Phase when the SuperGear loan commences.
Interest Cover
Threshold
The SMSF must prove sufficient current and ongoing annual income capacity to cover at least 125% of its
estimated annual interest payment requirement.
The asset classes from which annual income will be estimated include: cash, fixed income, ASX listed
equities and real property. The estimated net lease income expected to flow from the geared investment
property can also be included within the calculation as well as member contributions on a sensitised basis
(generally the lowest of the last three years annual contributions). Exceptions to the asset classes listed
above will be assessed by the Bank on a case-by-case basis. However, they must be standard tradable
assets with a proven consistent and ongoing revenue stream.
5
Funding Approval and Ongoing Funding Conditions (continued)
SMSF Trustee
The SMSF must have a corporate trustee as opposed to individual trustees in place.
Individual Indemnity
Requirement
Separate Individual Indemnities will be required from all suitable SMSF members where the borrowing
requirement exceeds set LVR thresholds or where the Bank determines that there may be a reliance on
member contributions to help demonstrate servicing.
The LVR thresholds are currently set at 50% for residential and 40% for commercial and rural
investment property.
An Individual Indemnity is an additional primary obligation given by the SMSF member in their capacity
as an individual directly to the Bank, separate from the SuperGear lending facility supplied by the Bank
to the SMSF trustee. Each Individual Indemnity will indemnify the Bank for losses it incurs in respect
of the SuperGear loan. It may require the individual (as grantor of the Individual Indemnity) to make
a part or full payment directly to the Bank for an amount equal to but not exceeding the outstanding
SuperGear borrowing obligation (plus enforcement costs) in the event of default by the SMSF trustee on
the SuperGear loan, or a Review Event occurring in relation to the SuperGear loan – refer section 1.6.2.7.
Payment under the Individual Indemnity does not satisfy the SuperGear loan and the grantor has no
subsequent right of indemnity from the SMSF in the event of a payment being made to the Bank.
Ongoing Review
Periodic review of the SuperGear lending facility and the performance of all SuperGear transactions with
SMSF trustees will be conducted by the Bank on an ongoing basis. Subject to appropriate notice,
we reserve the right to vary all terms and conditions associated with SuperGear transactions,
including interest rates, fees and repayment terms (including requiring early repayment of the loan in full)
as set out in the SuperGear Agreements.
Review Events
SMSF trustees must advise the Bank of all Review Events transacted by or applicable to their SMSF
and the investment property during the SuperGear loan term. All Review Events, including the examples
listed in section 1.6.2.7 will result in a review of the SuperGear lending facility and depending on
the outcome of the review and circumstances of each case may result in the Bank requiring the SMSF
trustee to repay the outstanding loan balance in part or in full and potential early termination of the
SuperGear lending facility, together with the requirement to pay all applicable fees, charges and other
costs. This may also result in the Bank enforcing its security over the investment property to help repay
the outstanding borrowing obligation and/or claiming under any Individual Indemnities provided by the
individual SMSF members.
Exceed Maximum
LVR Product Limits
– Review Event
In circumstances where the most recent independent property valuation review, which may be conducted
as part of the ongoing SuperGear transaction review process, reveal maximum SuperGear LVR product
limits being exceeded, we reserve the right to require the SMSF trustee to repay the SuperGear loan in part
or in full.
For Additional Information
Contact your financial, legal, taxation or other professional adviser.
6
Achieve
your SMSF
investment goals
sooner
7
Part 1 – SuperGear Overview
1.4 Principal Benefits
SuperGear provides an effective way to combine the power of gearing and the relative tax concessions available to your
complying SMSF, which is designed to comply with and efficiently utilise applicable superannuation and taxation laws, to
help accelerate the wealth accumulation capacity of your fund.
The following table provides a summary of the main benefits of SuperGear.
Principal Benefits
A Simple
and Complete
Integrated Solution
SuperGear offers a simple and complete lending solution through which a SMSF trustee can purchase
an investment property partly funded by a limited recourse loan. The option to use all necessary
Commonwealth Bank financial and administrative support services at competitive rates is also available to
you, including: financial planning and advice; SMSF set-up and ongoing fund administration; insurance;
equity products; broking; and, private banking services.
Attractive
Lending Terms
Highly competitive lending rates, loan-to-valuation ratios and extensive lending periods are available.
Legal & Tax Structure
SMSF trustees remain ultimately responsible for the compliance of their SMSF. Accordingly, you should
always seek your own legal and taxation advice prior to entering into any geared investment transactions
on behalf of your fund to confirm the current application of all relevant law.
Opportunity to
Acquire Better Quality
Assets through
Gearing
Utilising your capacity to borrow funds to help acquire investment property for your SMSF gives you
the opportunity to purchase higher value and better quality property of your choice, with the potential to
derive greater ongoing investment returns. You should seek your own financial advice to ensure your fund
will have sufficient diversification following the purchase of an investment property.
Opportunity to
Diversify Your
Investment Portfolio
Portfolio diversification forms part of a prudent SMSF investment strategy. Borrowing funds helps achieve
this objective by giving you the opportunity to acquire relatively more expensive real property assets to
help balance and extend a more traditional SMSF investment portfolio – for example, cash, fixed income
and ASX listed shares.
Opportunity to Add to
Your Superannuation
Benefits
Your beneficial interest entitles you to any net income and capital growth associated with the investment
property. Complying SMSFs currently receive significant taxation rate concessions relative to other
investment forms, including individuals.
You should always seek your own legal, taxation and financial advice before entering into any geared
investment property transactions on behalf of your SMSF to confirm the current application of all relevant
law and the appropriateness of the geared investment transaction for your fund and its investment strategy.
Opportunity to
Accelerate Your
Wealth
Your SMSF has the opportunity to own the asset faster and more cost effectively by using the relative tax
and interest savings available to it to pay down the loan and increase equity in the investment property
faster. Naturally this assumes both the SMSF and individual are always able to independently meet their
respective beneficial interest and borrowing obligations applicable to the investment property as and when
they fall due through the loan term. You should take into account that redraw and loan top-ups are not
available, therefore consider liquidity requirements of your SMSF before implementing this strategy.
8
Part 1 – SuperGear Overview
1.5 Principal Risks
Before making SMSF investments using SuperGear it is important all SMSF trustees understand the particular risks
associated with superannuation fund gearing transactions of this nature.
The following table outlines the main risks you need to evaluate as part of your SuperGear investment plans. They are
in addition to general market and economic risks that may impact your ability to generate adequate returns and avoid
financial loss.
Principal Risks
Investment Planning
Consistent with all investment decisions, borrowing to purchase investment property through SuperGear
will impact your SMSF’s and ultimately all SMSF members’ financial status. As a result it is essential you
take into account the current financial status and objectives of your SMSF and all its members to ensure
investment using SuperGear is appropriate, is in alignment with your SMSF investment strategy and is
able to adequately cover all circumstances that may result from Review Events of the type outlined in
section 1.6.2.7.
This PIB does not take into account your SMSF’s current financial status or objectives and does not in
any way represent a recommendation by the Commonwealth Bank to purchase investment property
using SuperGear.
To help ensure your SMSF’s and SMSF members’ current financial status and objectives are appropriately
taken into account you should always seek your own legal, taxation and financial advice before purchasing
investment property using SuperGear.
Contracting to
Acquire Real Property
for Investment
Purposes
All contracts entered by the SMSF trustee to acquire real investment property for their SMSF using
SuperGear must be transacted on commercial terms and in accordance with our Property Purchase &
Sale Instructions which will be supplied as part of the loan application process. The usual pre-purchase
risks and costs associated with real property acquisition remain and are the full responsibility of the SMSF
trustee. We will further review and validate the terms of all real property acquisitions through the settlement
phase to ensure they are in accordance with the SuperGear loan offer and reserve the right not to execute
the SuperGear Agreements and fund the SuperGear loan if materially different or in contravention of our
lending policies. This may result in you incurring significant loss – for example, loss of your deposit if you
are unable to obtain alternative funding to complete the acquisition.
Borrowing Risk
Borrowing to invest increases the risks associated with an investment, including the risk of loss of capital. It
is therefore important to obtain independent legal, taxation and financial advice and fully understand those
risks before proceeding with an investment using SuperGear.
Acquiring Real
Property by
Borrowing Funds
from the Bank
The ability for a SMSF to acquire a beneficial interest in real investment property partly funded by a limited
recourse SuperGear loan imposes certain additional obligations on the SMSF trustee and the geared
investment property as part of the SuperGear Agreements. They include: acknowledging the Custodian’s
right as legal title holder to the property to mortgage the property to the Bank as security for the loan;
and, requiring all suitable SMSF members to grant separate Individual Indemnities directly to the Bank
as further security for the loan, without a subsequent right of indemnity from the SMSF in the event of a
payment being made directly to the Bank.
The SuperGear Agreements also require all net lease income flowing from the investment property to be
directed toward servicing the minimum monthly loan repayment amount, to the extent outstanding.
9
1.5 Principal Risks
Principal Risks (continued)
Acquiring Real
Property by
Borrowing Funds
from the Bank
(continued)
Plus, the SMSF trustee must advise the Bank of all Review Events transacted by or applicable to their
SMSF or the investment property during the SuperGear loan term. All Review Events, including
the examples listed in section 1.6.2.7 will result in a review of the SuperGear lending facility and depending
on the outcome of the review and circumstances of each case may result in the Bank instructing
the SMSF trustee to repay the outstanding loan balance in part or in full and potential early termination of
the SuperGear lending facility, together with all applicable fees, charges and other costs. This may result in
the Bank selling the investment property, which may result in a negative return on your investment,
together with loss of the SMSF funds invested in the property, and where applicable, a requirement that
the grantors of the Individual Indemnities make payments directly to the Bank equal to the amount required
to satisfy the outstanding SuperGear borrowing obligation in part or in full. You should note that Review
Events include changes in law and other events outside your control.
Maintaining Real
Property for
Investment Purposes
Leasing real property for investment purposes to tenants on commercial terms through a property
manager can be expensive to maintain on an ongoing basis. Net lease income available to the SMSF
may fluctuate markedly through the SuperGear loan term. The SMSF trustee must ensure the property
is maintained to a sufficient standard to enable the investment property to be available for lease on
commercial terms at all times, plus ensure their SMSF has sufficient other funds available as necessary to
cover any variations in net lease income and meet their SuperGear borrowing obligations as and when
they fall due.
Depreciation in Real
Property Market
Value and potential
Call by the Bank for
Repayment
As with all real property investments the market value of real property acquired using SuperGear may
significantly change through the loan term. The reasons for this may include, but are not limited to: the
property’s location; quality and condition; tenancy; current and forecast lease yields; current and forecast
market interest rates; the real estate market for the area and in general. If at any time during or at the end
of the SuperGear loan term the market value of the property falls relative to its capital cost base (includes
costs or acquiring and improving the property) you may make a negative return on your investment if the
property is sold. If the market value of the property falls sufficiently to exceed the maximum SuperGear
LVR limits, based on an independent property valuation review, the Bank may require the SMSF trustee
to repay the loan in part or in full. In such circumstances the investment property may need to be sold to
achieve this and you may lose the SMSF funds invested in the geared investment property, plus where
applicable the grantors of the separate Individual Indemnities may be required to make payments directly
to the Bank in an amount equal to the amount required to satisfy the outstanding SuperGear borrowing
obligation in part or in full. You should obtain independent real estate valuation advice to understand
and help address the factors impacting the value of the investment property prior to purchase and as
appropriate for the duration of the SuperGear loan term.
Ongoing Legislative
Compliance and
Change
The SMSF trustee is ultimately responsible for ensuring their SMSF is compliant with all relevant laws and
regulations on an ongoing basis, including the SIS Act, taxation, trust and corporations law, together with
other administrative requirements, including managing SMSF investments in accordance with their fund’s
current investment strategy. Superannuation laws are complex and penalties for non-compliance can
be severe. Prior to purchasing investment property using SuperGear, SMSF trustees should obtain their
own advice to ensure the investment and borrowing is permitted by law and appropriate for their SMSF.
This advice should be reviewed and updated on an ongoing basis, for example if legislation changes,
or following additional guidance from the applicable regulatory authorities as this may adversely impact
property investments purchased using SuperGear.
10
Part 1 – SuperGear Overview
Legal Risk
Australia, as a member state of the United Nations, is obliged to implement United Nations Security Council
sanctions. Australia also may be required to implement other international sanctions and sometimes
imposes unilateral sanctions. Sanctions can cover various subject matters including financial restrictions.
Consequently, the Bank may be prohibited from dealing with certain persons or entities.
This means that if the Bank is aware that you are a proscribed person or entity, then the Bank may be
required to suspend, cancel or refuse you services or close or terminate any account, facility, transaction,
arrangement or agreement with you.
We may also be required to freeze your assets. You could incur significant costs as a result of these actions.
11
1.6 How does SuperGear work?
1.6.1Structure
This section outlines how the SuperGear complete lending solution works. It illustrates how all parties and agreements
associated with a SuperGear transaction combine to allow its simple and effective operation in compliance with current
and applicable superannuation and taxation law.
Customer Agreement
Custodial Deed
Lender
Commonwealth
Bank
6
1
Borrower
SMSF Trustee
5
7
Custodian
Property Management Agreement
4
Property
Manager
2
3
Investment
Property
Real Property
The Principal Steps to the SuperGear Transaction
1
The SMSF trustee receives authority to borrow funds from the Commonwealth Bank to help purchase an investment
property in accordance with the SuperGear Property Purchase & Sale Instructions supplied by the Bank as part of the loan
application process.
2
The SMSF trustee successfully enters a contract to purchase the investment property, the Commonwealth Bank reviews
and verifies the transaction then executes all SuperGear Agreements and all funds are transferred to the vendor to complete
the acquisition.
3
Upon acquisition the Custodian holds legal title to the investment property on trust for the SMSF in accordance with the
SuperGear Customer Agreement and Custodial Deed.
12
Part 1 – SuperGear Overview
The Principal Steps to the SuperGear Transaction (continued)
4
The SMSF trustee confirms their specific property leasing arrangements with their Custodian approved property manager
appointed to manage the investment property in accordance with the Property Management Agreement.
5
The SMSF receives all beneficial ownership interests associated with the investment property, including any net lease
income and/or capital growth. The SMSF must also meet all obligations associated with the investment property.
6
The Custodian gives the Bank security over the investment property.
7
Upon Final Payment and release of the Bank’s mortgage, the SMSF trustee instructs the Custodian to transfer legal title to
the investment property to them or a separate custodian nominated by them.
The Principal Documents to the SuperGear Transaction
Property Purchase
& Sale Instructions
A brief set of instructions issued by the Bank to the SMSF trustee as part of the SuperGear
application and offer process setting out the steps to be taken at auction or private treaty
sale to ensure the property is acquired in accordance with the SuperGear Agreements
and to help prevent any additional ad valorem stamp duty arising from the transfer of legal
title to the investment property from the vendor to the Custodian at completion of the
purchase transaction.
Customer
Agreement
The deed executed by the SMSF trustee, all current SMSF members, the Custodian and the
Bank setting out certain terms and conditions in relation to the SuperGear transaction.
Custodial Deed
The deed poll executed by the Custodian setting out the terms and conditions by which it
holds legal title to each investment property on trust for each SMSF trustee. Where a private
custodian is being used, the SMSF trustee may elect to use the Bank’s Private Custodial
Deed or source their own custodian deed. When using their own custodian deed, a Private
Custodian Authorisation Deed will need to be executed, which ensures it meets the Bank’s
requirements.
Property
Management
Agreement
This agreement is utilised where the Bank’s Custodian is being used and is executed by the
Property Manager, SMSF trustee and Custodian setting out the terms and conditions by
which a Property Manager selected by the SMSF trustee and approved by the Custodian
is required to manage the property and ongoing lease arrangements as agent for the
Custodian and SMSF trustee.
Loan &
Security
Loan Agreement,
Mortgage
and Individual
Indemnities
The agreement executed by the SMSF trustee setting out the specific SuperGear loan details
agreed with the Bank including, the loan amount, term, interest rate, fees, minimum monthly
loan repayment requirement etc, together with the detailed terms and conditions applicable
to the SuperGear loan. The Custodian mortgages the investment property and where
applicable the SMSF members are required to grant separate Individual Indemnities directly
to the Bank as additional security for the SuperGear loan.
Legislative
Compliance
Certificate by SMSF
Trustee
The declaration executed by the SMSF trustee confirming the SMSF, including its trust deed and
investment strategy, were established and will remain in accordance and compliant with the SIS
Act, and is authorised to borrow funds to purchase investment property on commercial terms
until completion of the SuperGear transaction.
SuperGear Risk
Disclosure and
Advice Form
This form is completed and executed by the SMSF trustee and their financial adviser or
accountant confirming the compliance of the fund, the financial position of members, and that
they the SMSF trustee has received financial advice regarding the risks associated with gearing
inside a SMSF. The SMSF trustee and their financial planner or accountant should read this
Product Information Booklet before completing this form. Refer to Section 2.2 for a copy.
Product
Information
& Guidelines
Operating
Structure
13
1.6.2 Starting and Maintaining SuperGear
The figures and tables in this section provide an easy to follow step-by-step guide on how you can get started with
SuperGear and the principal activities required to maintain the SuperGear lending facility through its lifecycle. All the main
steps including what happens at conclusion of the loan, plus your options and the general implications associated with
the ongoing ownership or sale of the investment property by your SMSF following conclusion of the SuperGear loan
are outlined.
1.6.2.1Getting Prepared
Preparation
You should consider the financial capacity of your SMSF to purchase geared investment
property and adequately service the associated borrowing obligations on an ongoing
basis. Plus, the investment property you wish to purchase, its location, proposed function,
likely cost, the amount you want to borrow, transaction timeframe, expected lease
investment revenues and capital growth.
1. Review SuperGear PIB and its
alignment with your SMSF investment
strategy and future goals
Identify a suitable investment property to purchase on commercial terms and start your
due diligence investigations to ensure it appropriately aligns with your SMSF investment
strategy, financial capacity and wealth accumulation goals.
2. Identify the investment property
you plan to acquire and start your
investigations
Your financial planner or accountant will review and advise on the overall suitability of
your SMSF to purchase geared investment assets, including alignment with your current
investment strategy, and help make any refinements to your investment strategy that may
need to be made consistent with their advice and your approval.
Note, before you exchange on a sale contract to purchase an investment property, you
should first obtain financial advice and complete the form in Section 2.2.
3. Engage a qualified Financial Planner
or Accountant
14
Part 1 – SuperGear Overview
1.6.2.2Funding Requirement Review and Approval
Funding Requirement Review and Approval
You will need to supply a general and financial outline of your investment plans, together
with audited SMSF financial statements for the last three financial years (or since your
SMSF was established) and/or future SMSF financial forecasts, plus other relevant
supporting financial information as available, depending on when your SMSF was
established.
The Bank will review the relevant general and financial details and carry out a credit
assessment of your application relative to the SuperGear funding approval conditions,
based on the financial information you have supplied.
4. SMSF Trustee contacts a
Commonwealth Bank Relationship
Manager
You will also be asked to supply a copy of your current SMSF trust deed for review and
approval by the Bank’s legal team, principally to confirm your SMSF is authorised to
borrow funds. You will subsequently be advised whether it is satisfactory or whether you
need to arrange for it to be updated by your solicitor and re-submitted for review and
approval by the Bank’s legal team.
If the Bank pre-approve the investment property you have chosen, you will receive a
SuperGear offer pack. The pack will set out our loan terms and conditions, including the
agreements, security and other documentation.
You must review all the SuperGear documents carefully and obtain independent legal,
taxation and financial advice. You should not proceed to purchase the investment property
unless all the terms and conditions of the SuperGear documents are satisfactory and you
are certain you can satisfy all the terms and conditions of funding.
5. Receive SuperGear Offer Pack
A Property Purchase & Sale Instructions will also be issued detailing the steps to be
taken at auction or private treaty sale to ensure the property is acquired in accordance
with the SuperGear Agreements and help prevent any additional ad valorem stamp duty
obligations arising on the transfer of the property to the Custodian at completion of the
purchase transaction.
15
1.6.2.3 Finalise Investigations, Acquire Property and Appoint Property Manager
Finalise Investigations, Acquire Property and Appoint Property Manager
Acquire the property via auction or private treaty sale on commercial terms and ensure
the sale contract is exchanged in accordance with the Property Purchase & Sale
Instructions supplied to you.
Advise your Commonwealth Bank Relationship Manager you have entered a contract
to purchase the property in line with the funding approval conditions set out within the
SuperGear offer pack, taken out full property and public liability insurance cover with an
authorised insurer and commenced preparation for property settlement.
6. Agree to acquire investment
property
Appoint the property manager you have selected to manage the investment property on
an ongoing basis from property settlement.
7. Appoint property manager
approved by the Custodian
16
Part 1 – SuperGear Overview
1.6.2.4Engage SuperGear
Engage SuperGear
Your Relationship Manager will review the investment property purchase transaction to
ensure all funding approval conditions set out within the SuperGear offer pack and advise
if any further actions are required before initiating SuperGear.
8. Sign and return all SuperGear
Agreements and property acquisition
details
If all is approved, we will authorise all applicable Agreements initiating the SuperGear
operating structure for your SMSF, help transfer legal title to the investment property
from the vendor to the Custodian, receive a mortgage over the investment property from
the Custodian, plus separate Individual Indemnities from all eligible SMSF members
as applicable, and supply the approved loan funds to the vendor at the completion of
property settlement.
9. Initiate SuperGear
You will receive a SuperGear acceptance pack, including confirmation of the approved
transaction, signed copies of all SuperGear Agreements, deduction of all establishment
fees from your nominated Commonwealth Bank account for payment out of available
SMSF equity, and a schedule outlining your ongoing minimum monthly loan repayment
and fee payment obligations.
The Custodian holds legal title to the investment property on trust for the SMSF trustee for
the duration of the SuperGear loan term.
10. Loan commences
17
1.6.2.5Lifecycle Management Requirements for SuperGear
Lifecycle Management Requirements for SuperGear
The property manager ensures the property is kept in good repair, available for lease
on commercial terms at all times, that all financial obligations associated with the
investment property are paid, and that all net lease income is directed toward servicing
the outstanding minimum monthly loan repayment amount as advised by the SMSF
trustee and the Bank.
11. The property manager maintains
the investment property and ensures
it is always available for lease
Your principal activities include: appropriately directing and supporting the Custodian
and property manager to ensure all administrative and financial obligations associated
with the investment property, including all rates and taxes, are fulfilled as they fall due on
an ongoing basis; ensuring all SuperGear loan repayment and fee payment obligations
are met on time and in full on an ongoing basis; advising the Custodian and Bank of all
Review Events of the type outlined in section 1.6.2.7; and, ensuring your SMSF together
with its investment strategy and administrative responsibilities remain in compliance with
all applicable law on an ongoing basis.
12. The SMSF Trustee receives the
beneficial interest and obligations
associated with the geared
investment property
13. The Commonwealth Bank
conducts periodic reviews of the
SuperGear transaction and provides
support services
The Bank may conduct both periodic and exceptions based reviews of the SuperGear
transaction on an ongoing basis. Such reviews are for the sole benefit of the Bank and the
Bank has no obligation to you in relation to these reviews. Subject to appropriate notice, we
reserve the right to vary all terms and conditions associated with the transaction, including
interest rates, fees and repayment terms (including requiring immediate repayment of
the loan) as set out within the SuperGear Agreements. All Review Events, including the
examples listed in section 1.6.2.7 will result in a review of the transaction and depending on
the outcome of the review and circumstances of each case may result in the Bank requiring
you to repay the outstanding borrowing obligation in part or in full, potential early termination
of the SuperGear loan and sale of the investment property.
18
Part 1 – SuperGear Overview
1.6.2.6Conclusion of the SuperGear Lending Facility
Conclusion of the SuperGear Lending Facility
On making the Final Payment and discharge of the mortgage over the property by the
Bank, you may instruct the Custodian to transfer legal title to the investment property to
the SMSF trustee or a separate custodian nominated by you.
No capital gains tax should generally apply to the transfer under current law.
A stamp duty exemption is also currently available in all Australian States and Territories
where legal title is transferred to the SMSF trustee, therefore no ad valorem stamp duty
will generally apply to the transfer under current law.
14. Legal title to the investment
property transfers to SMSF Trustee
upon Final Payment
1.6.2.7Review Events
Consistent with the SuperGear Agreements, SMSF trustees must advise the Commonwealth Bank of all Review Events
transacted by or applicable to their SMSF or the geared investment property during the SuperGear loan term. Note,
Review Events are in addition to SuperGear loan events of default which are also set out in the SuperGear Agreements.
A Review Event including the examples listed below will result in a review of the SuperGear lending facility and depending on
the outcome of the review and circumstances of each case may result in the Bank requiring the SMSF trustee to repay
the outstanding loan balance in part or in full and potential early termination of the SuperGear lending facility, together with
the requirement to pay all applicable fees, charges and other costs.
This may also result in the Bank enforcing its security over the investment property to help repay the outstanding
SuperGear borrowing obligation and/or claiming under any Individual Indemnities provided directly to the Bank by
the individual members of the SMSF.
Examples of Review Events requiring immediate notification to the Commonwealth Bank include:
• Exceeding the maximum SuperGear LVR product limits on the most recent independent property valuation review;
• Events negatively impacting or likely to negatively impact the current or future value of the investment property or its
capacity to derive and maintain lease income at or above the amount estimated at acquisition;
• The intention to sell the investment property during the SuperGear loan term;
• A court order being made in relation to the investment property during the SuperGear loan term;
• Any change in law or any other circumstances that adversely affects, or likely to adversely affect the Bank’s or
Custodian’s assessment of, the risks of financing or owning the investment property or the terms of the contract or any
document referred to in the SuperGear offer pack;
• A change in the investment strategy of the SMSF;
• Any new borrowing transaction conducted by the SMSF trustee on behalf of their SMSF;
• All SMSF transactions involving acquisitions or disposals equivalent in value to more than 25% of the fund’s current
total assets;
• The SMSF commencing its Pension Phase, the retirement of a SMSF member or other event giving rise to a benefit
payment entitlement from the SMSF;
• The death or permanent disability of one or more SMSF members; and
• The change, addition, or departure of one or more SMSF members.
19
1.7 Applicable Interest Rates, Fees and Taxes
Category
Type
Value
Financial Advice
Actual cost.
To provide the SMSF trustee with advice with regards
to the risks, costs and obligations of gearing inside
your SMSF.
Establishment Fee
Residenital- $1,500.
Commercial- Available upon application.
To establish the pre-packaged SuperGear operating
structure and lending facility.
Stamp Duty –
Initial Property
Transfer from
Property Vendor
Rates depend on the State/Territory in
which the property is purchased.
Tax paid to the relevant Australian State/Territory tax
authority on the purchase of investment property in
applicable circumstances.
Other Acquisition
Costs
Actual cost.
Advisory/service costs incurred by the SMSF
trustee to purchase the geared investment property,
including legal, conveyancing, inspection and
independent property valuation costs.
Interest
Current and applicable Commonwealth
Bank Commercial Lending interest
rate multiplied by the outstanding loan
balance.
Fixed or variable interest rate. Interest is generally
payable monthly in arrears and forms part of your
minimum monthly loan repayment amount.
Product
Maintenance Fee
$25 per month.
Applicable if you elect to utilise the Bank Custodian
to support ongoing administration costs required
to maintain the SuperGear operating structure and
supply requisite custodial services.
Loan Service Fee
Residential – $10 per month.
Applicable if you elect to utilise the Bank Custodian
Premium Custody Service Pty Ltd to
Advice
Set-Up
Purpose
Commercial & Rural – $20 per month.
To support ongoing administration costs required to
maintain the SuperGear loan, including periodic and
exceptions based reviews.
Ongoing
Property
Management
Actual cost.
To support the ongoing costs required to manage
and maintain the investment property to a sufficient
standard to enable it to be available for lease on
commercial terms at all times.
Land Tax
Rates depend on the State/Territory in
which the property is located.
Annual tax paid to the relevant Australian State/
Territory tax authority on the assessed land value in
applicable circumstances.
20
Part 1 – SuperGear Overview
1.7 Applicable Interest Rates, Fees and Taxes
(continued)
Category
Type
Other Completion
Costs
Value
Actual cost.
Purpose
Advisory/service costs incurred by the SMSF
trustee as applicable to conclude the loan and help
transfer legal title to the investment property from
the Custodian to the SMSF trustee or a separate
custodian nominated by the SMSF trustee, including
legal and conveyancing costs, agents’ commissions
and disbursements.
You must also pay to the Custodian any amount
required by the Custodian to cover actual or
anticipated liabilities the Custodian may have in
relation to the property.
Conclusion
Fixed Rate Only –
Early Repayment
Adjustment
Actual net cost.
An adjustment only applicable to a Fixed Rate
SuperGear loan made by the Bank in accordance
with the SuperGear loan agreement. In summary,
the adjustment is calculated based on the present
value of the difference between what the Bank would
have earned less what it can now earn on the loan
prepayment amount up until the fixed rate maturity
date set out in the SuperGear offer pack.
Fixed Rate Only –
Early Repayment
Adjustment
Administration Fee
$300.
Only applicable to a Fixed Rate SuperGear loan to
support additional administrative costs associated
with concluding the loan during a fixed rate loan
period.
21
1.8 Illustrative Examples
Example One – How SuperGear
can work in practice
Tom is a 48 year old successful architect in Sydney. Tom
is looking to build on the performance of his Self Managed
Super Fund (SMSF) set-up three years ago on advice
from his financial planner. Currently the fund has about
$480,000 in net assets – $230,000 in cash based term
deposits and approximately $250,000 in a portfolio of
ASX listed shares. Tom and his wife are both members
and directors of a corporate trustee of the fund and plan
to continue to make approximately $25,000 in combined
concessional contributions to the fund per annum. Lately
Tom has been dissatisfied by the performance of the stock
market and consistent with his fund’s investment strategy
decides in consultation with his financial adviser to further
diversify his fund’s investments by purchasing a $500,000
residential investment property within approximately
15 kilometers of the CBD with the help of a $300,000
SuperGear loan and lease it out on an ongoing basis
through a local real estate agent.
In summary:
• $480,000 SMSF net assets;
• $25,000 concessional SMSF contributions per annum;
• $500,000 investment property;
• $300,000 SuperGear loan with a 25 year maximum
repayment timeframe on principal and interest terms;
Approval of SuperGear Lending Facility
Tom contacts a Commonwealth Bank Relationship
Manager to discuss his investment plans. His application
is reviewed relative to the SuperGear lending criteria. On
approval Tom receives a SuperGear loan offer pack.
In summary:
• Interest cover on an assessment of the expected
annual revenue inflow divided by the expected annual
interest expenditure outflow, exceeds the 125%
minimum interest cover threshold;
• A review of Tom’s SMSF trust deed by his legal
adviser confirms his SMSF is authorised to borrow for
investment purposes;
• With the help of his financial adviser Tom forwards a
completed SuperGear Risk Disclosure & Advice Form
to the Bank confirming his SMSF’s investment strategy
allows borrowing for investment purposes and a
financial summary of its members;
• The 60% LVR exceeds the 50% Individual Indemnity
exemption threshold therefore Tom is advised and
accepts that both his wife and he will be required to
grant Individual Indemnities directly to the Bank;
Acquisition of Investment Property,
Initiation of SuperGear Agreements and
Commencement of the SuperGear Loan
Tom as a director of the corporate trustee of his SMSF
successfully contracts to purchase the $500,000
residential investment property at auction for his SMSF,
being careful to follow the Property Purchase & Sales
Instructions supplied by the Bank. Tom notifies his
Commonwealth Bank Relationship Manager that he has
successfully entered a contract to purchase the investment
property, then signs and returns all SuperGear Agreements
to the Bank for review. Following review and approval, the
Bank executes all agreements initiating the SuperGear
operating structure and loan for Tom’s SMSF. The Bank
helps to ensure legal title to the property is correctly
transferred to the Custodian, receives mortgage security
over the property from the Custodian, plus supplies all
approved loan funds to the vendor at the completion of
property settlement. The SuperGear loan commences.
In summary:
• The SMSF trustee successfully contracts to purchase
the $500,000 residential investment property for their
SMSF and exchanges contracts with the property
vendor in accordance with the SuperGear Property
Purchase & Sales Instructions;
• Full property and public liability insurance policies are
taken out with the insurers;
• The real estate agent approved by the Custodian to
manage the investment property is appointed by Tom;
• Tom receives a SuperGear acceptance pack from the
Bank confirming the transaction and commencement
of the SuperGear loan. This includes a schedule
outlining his SMSF’s ongoing minimum loan repayment
(including interest and fee payment) obligations,
together with signed copies of all SuperGear
Agreements, loan and security documentation.
22
Part 1 – SuperGear Overview
Example Two – SMSF borrowing
using SuperGear to purchase a
commercial property
Ella is a 50 year old doctor who runs a successful private
practice and has her own SMSF with approximately
$320,000 in net assets – principally a portfolio of cash
securities and ASX listed shares.
Ella would like to move to larger commercial premises
nearby but to fund the purchase she would need to sell
her current premises and then take out a loan for
the difference.
Details
Expected sale price of new
commercial premises
$650,000
Expected net sale proceeds from
current commercial premises
$450,000
Required loan amount
$200,000
However, after meeting with her accountant and receiving
appropriate financial, legal and tax advice Ella decides to get
her SMSF to buy the new commercial premises instead.
To arrange the purchase Ella organises a SuperGear loan
with a Commonwealth Bank Relationship Manager for
$200,000. During this period Ella also sells her existing
premises and, contributes the $450,000 proceeds to
her SMSF as a non-concessional contribution. Ella then
successfully purchases the new premises with the available
funds and the SuperGear lending facility commences.
As the premises meets the definition of business real
property under the superannuation investment rules,
Ella is able to lease the property back from her fund under
an arm’s length commercial arrangement. Ella’s SMSF can
then use the lease payments to help service the $200,000
loan amount.
Under this arrangement and subject to her specific
circumstances, Ella should generally be entitled
to a deduction for the lease payments paid to her fund
and her SMSF should generally be entitled to a deduction
for interest expenditure associated with the outstanding
borrowings. In addition, Ella’s SMSF should generally only
pay tax at concessional superannuation tax rates on any
income or future capital gains.
23
1.9 General Matters
1.9.1 Code of Banking Practice
The relevant provisions of the Code of Banking Practice
apply to SuperGear. You should read the Bank’s
information booklet “The Better Banking Book” copies
of which may be obtained by telephoning the Bank
on 13 22 21 (between 8am and 8pm, Monday to
Friday), contacting your relationship manager, visiting
our website at www.commbank.com.au or from any
branch of the Bank.
The “Better Banking Book” contains useful information
on a range of banking matters. These include the rights
and obligations that arise out of the banker and customer
relationship, account opening procedures, the Bank’s
obligations regarding confidentiality of your information,
complaint handling procedures, bank cheques, the
advisability of you informing the Bank promptly when
you are in financial difficulty, and the advisability of you
reading the SuperGear terms and conditions applying to
any banking service provided to you or in which you are
interested.
1.9.2 If you have a complaint
The Code of Banking Practice require that we have
procedures in place for dispute resolution. The Code states
that the process for dispute resolution is to be readily
available to customers free of charge.
Should you wish to make a complaint then:
(a) P
lease contact the adviser through whom you bought
the product; or
(b) If you bought the product directly from the Bank
please write to our Client Relations department:
Mail –
Customer Relations
Commonwealth Bank Group
Reply Paid 41
Sydney NSW 2001
Telephone – 1800 805 605
Fax –
1800 028 542
[email protected]
Email –
If the Bank’s internal dispute resolution is unsuccessful,
you may take the matter to an external authority such as
the Australian Financial Ombudsman Service:
Contact –
Phone –
Fax –
Email –
Internet –
Mail –
Financial Ombudsman Service
1300 78 08 08
(03) 9613 6399
[email protected]
www.fos.org.au
GPO Box 3
Melbourne VIC 3001
1.9.3Disclosures
Commissions
The Bank and its related bodies corporate may pay upfront
and trail commissions to financial advisers and other
financial intermediaries in respect of SuperGear. These
commissions should be disclosed in your financial adviser’s
financial services guide.
24
Part 1 – SuperGear Overview
1.10Glossary
The following terms have the following meanings in this PIB. Terms not defined in this Glossary or otherwise in
the remainder of the SuperGear PIB have the meaning given to them in the terms and conditions set out within
the SuperGear Agreements.
Glossary
Accumulation Phase
The period during which a SMSF member is not in Pension Phase and is endeavouring to build up their
investment portfolio and generally make contributions toward their SMSF in preparation for their retirement.
Custodian
Premium Custody Services Pty Ltd or another company nominated by the customer to act as custodian– a
nominee company appointed by the Borrower to hold legal title to the investment property for the duration of
the loan in accordance with the terms of the SuperGear Custodial Deed, Private Custodial Deed or Private
Authorisation Deed. Premium Custody Services Pty Ltd is a wholly owned but non guaranteed subsidiary of
the Commonwealth Bank of Australia. Note, the Custodian only holds the investment property as a nominee
and trustee on behalf of the Borrower.
Final Payment
The payment required to complete your SuperGear borrowing obligations (including any early repayment
adjustment and associated administration fee that may apply to a fixed rate SuperGear loan) and pay or
provide for liabilities relating to the investment property.
Individual Indemnity
A primary obligation granted by each suitable SMSF member in their personal capacity as an individual
directly to the Bank, to indemnify the Bank for losses it incurs in respect of the SuperGear loan. The grantor
has no subsequent right of indemnity from the SMSF in the event they are required to make a payment
to the Bank. The indemnity is separate from the SuperGear loan supplied by the Bank to the SMSF trustee,
as a result payment under the indemnity does not satisfy the SuperGear loan.
Limited Recourse
The rights of the lender against the SMSF trustee for default on borrowing (including all outstanding fees and
charges) are limited to the rights relating to the original geared investment property, or a replacement asset,
as opposed to the other assets of the SMSF.
Pension Phase
The period during which a SMSF member is receiving a ‘pension’ (as defined in the SIS Act) from the
‘segregated current pension assets’ (as defined in the Income Tax Assessment Act 1997) of their SMSF .
Review Event
An event transacted by or applicable to the SMSF or the investment property during the SuperGear loan
term of which a SMSF trustee must notify the Bank and will result in a review of the SuperGear lending
facility, as specified in the SuperGear loan agreement.
SuperGear
Agreements
The agreements within the SuperGear offer pack issued by the Commonwealth Bank once you reach this
stage in the SuperGear application process, principally including the documents outlined in ‘The Principal
documents to the SuperGear transaction’ outlined in section 1.6.1 of this PIB.
Part 2 – SuperGear Application
2.1 Application Process – Next Steps
Below is a summary of the SuperGear Application process. Please call a Commonwealth Bank Relationship Manager on
13 1998 to discuss your SuperGear Application or visit www.commbank.com.au/supergear for additional information.
1
2
3
Step 1 – Review SuperGear Product Information
• Read the SuperGear Product Information Booklet in full.
• Consider your SMSF investment strategy, your SMSF’s current and forecast financial capacity, the investment
property you want to acquire and, the property manager you plan to select.
Step 2 – Engage a Qualified Financial Planner or Accountant
• Contact a qualified financial planner or accountant to advise on the suitability of your SMSF to make geared
investment acquisitions, any necessary refinements to your SMSF’s investment strategy and the current and
forecast financial capacity of your SMSF. They can also explain the SuperGear product, including key product
features and restrictions to help determine if it is the right product for you.
Step 3 – Seek Funding Approval from the Commonwealth Bank
• If suitable, contact a Relationship Manager on 13 1998 to seek SuperGear funding approval. You will be asked
to present an outline of your investment property acquisition plans, your audited SMSF financial statements
and/or future SMSF financial forecasts, plus other relevant supporting financial information as available,
depending on when your SMSF was established, plus the property manager you plan to appoint.
25
SuperGear Risk Disclosure & Advice Form
Guide to Completing the Risk Disclosure & Advice Form
There are significant risks associated with borrowing to purchase an investment property inside your Self-Managed
Super Fund (SMSF). That is why it is crucial that the SMSF Trustee first obtains financial advice from a suitably qualified
accountant or financial adviser before they commit to the purchase of a property. By better understanding the risks, they
are then in a better position to determine if this strategy is right for the SMSF and its members.
The SuperGear Risk Disclosure & Advice Form is split into the following sections:
1.1 - 1.3 Risk Disclosure
This should be completed by the Directors of the SMSF Trustee to help confirm they understand the key risks of gearing inside
their SMSF.
These should be explained to them by their accountant or financial adviser.
1.4 Members Financial Summary
This section should be completed by the Directors of the SMSF Trustee, with the help of their accountant or financial adviser.
The purpose of this information is help the Bank assess the application, taking into account the financial position of the SMSF
members:
• Total Assets: include properties, home contents, non super investments and motor vehicles
• Total Liabilities: include balances on any existing loans in personals names including credit cards
• Monthly Repayments: repayments on those liabilities listed under ‘Total Liabilities’
• Gross Monthly Income: include salaries, investment income, government support payments and distributions from businesses
and trusts
• Borrowing money outside SMSF to provide equity for the SuperGear loan: where required to make additional contributions to
your SMSF to complete the purchase, confirm where the funds are coming from, e.g. accessing redraw on your home loan,
which is supported by your place of residence
3.1 Compliance
Running a SMSF entails significant responsibilities for the SMSF Trustee, and this section is to ensure the SMSF Trustee has
received appropriate advice including that the SMSF’s investment strategy is up to date and compliant. For refinances we also
need to ensure the existing loan is compliant with the SIS Act.
3.2 Product Questionnaire
The person providing financial advice should have a good general understanding of the features of the SuperGear product as
this may affect the risks associated with borrowing inside the SMSF depending upon the personal circumstances of the SMSF
members. For example the inability to access loan re-draw during the loan term may affect the liquidity of the SMSF especially if
they plan to make extra repayments. That is why it is important that the SMSF Trustee and their accountant or financial adviser
read the Product Information Booklet in full before they provide this advice including sections 1.3 Key Features and 1.5 Principal
Risks.
Before a Self-Managed Super Fund (SMSF) obtains a SuperGear Loan, the SMSF Trustee must consider:
• The Product Information Booklet (PIB) (copy is available by visiting our website www.commbank.com.au/supergear or
calling 13 1998);
• Whether the loan is right for the SMSF;
• The risks associated with the loan (including those set out in the Section 1.5 on Principal Risks in the PIB).
We strongly recommend the SMSF Trustee obtains independent legal, taxation and financial advice before
purchasing an investment property using SuperGear to get a better understanding of the risks of the loan and the
way in which the SMSF Trustee can manage those risks.
Except where the SMSF Trustee has only one director, at least two directors must complete Section 1 and 2. The SMSF
Trustee’s accountant or licensed financial adviser should complete Section 3 and 4.
005-656 260115
Page 1 of 3
Section 1 (to be completed by the SMSF Trustee Directors)
1.1 Borrowing to Invest
a. The SMSF Trustee is aware that borrowing to invest can magnify losses as well as gains,
and the more that is borrowed the greater the risks.
b. Property is an illiquid asset. The SMSF Trustee is aware that the SMSF needs to have
sufficient liquid assets such as cash to meet future cash flow needs, including during any
periods of non-tenancy of an investment property.
Director 1
1.2 Reliability of Income
a. The SMSF Trustee confirms that the SMSF can meet the proposed loan repayments, and
that the SMSF Trustee should only rely on member contributions where those members
have a reliable and stable source of income.
1.3 Responsibilities
a. The SMSF Trustee is aware that it is responsible for managing and regularly monitoring the
loan and the value of the property.
b. The SMSF Trustee understands and accepts that a drop in the value of the property may
in some circumstances trigger a breach of the loan covenants entitling the Bank to enforce
the loan and to sell the property.
c. Any members providing an indemnity as security for this loan are aware that they may be
required to provide additional funds to repay the loan if requested by the Bank.
d. The SMSF Trustee confirms that the risks of gearing to purchase property have been
explained to the members and they understood and accepted those risks.
Director 2
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
1.4 Members Financial Position
A summary of each member’s financial position, including members interests in related companies and trusts is outlined
below:
Non-Super
<Member 1 Name>
<Member 2 Name>
<Member 3 Name>
<Member 4 Name>
Total Assets
$
$
$
$
Total Liabilities
$
$
$
$
Monthly Repayments
$
$
$
$
$
$
$
Yes – using
primary residence
Yes – using
primary residence
Yes – using
primary residence
Yes – not using
primary residence
Yes – not using
primary residence
Yes – not using
primary residence
Gross Monthly Income
$
Borrowing money outside
Yes – using
SMSF to provide equity
primary residence
for the SuperGear loan
Yes – not using
primary residence
No
No
No
No
Section 2 (to be completed by the SMSF Trustee Directors)
I/We acknowledge having read and accepted this SuperGear Risk Disclosure and Advice Form and the Product Information
Booklet by signing below.
SMSF Trustee Director 1
Print full name
Signature
✗
SMSF Trustee Director 2
Print full name
Signature
✗
005-656 260115
Date
DD/MM/YYYY
Date
DD/MM/YYYY
Page 2 of 3
Section 3 (to be completed by the Adviser or Accountant)
3.1 Compliance
a. We have been engaged by the below named SMSF Trustee to provide advice with
reference to the operations of the below named complying SMSF.
b.
c.
d.
e.
Yes
The Investment Strategy of the SMSF is current, complies with the relevant provisions
of the Superannuation Industry (Supervision) Act 1993 and Regulations (SIS Act) and
authorises the SMSF Trustee to borrow money to make the proposed purchase.
Yes
The existing limited recourse lending arrangement that the SMSF Trustee is seeking to
refinance complies with the SIS Act (for refinances only).
Yes
3.2 Product Questionnaire
a. The security property must remain fully insured and held in trust by a custodian for the
duration of the loan term (refer to PIB Section 1.3).
b.
c.
Adviser/Accountant
Personal indemnities can be required from all eligible members (refer PIB section 1.3).
The customer is obligated to notify the Bank when a Review Event occurs including the
retirement of any members of the SMSF (refer PIB section 1.6.2.7).
The customer can redraw funds or request a top-up of the SuperGear loan (refer PIB
section 1.3).
If the loan interest rate is fixed, any extra repayments during the fixed term may incur break
costs and fees (refer PIB section 1.7).
Yes
No
Yes
No
Yes
No
Yes
No
Yes
No
Section 4 (to be completed by the Adviser or Accountant)
I confirm that the risks of gearing to purchase property have been explained to the Directors of the SMSF Trustee and they
appeared to understand and accept those risks.
Adviser/Accountant
Print full name
Signature
✗
Name of Firm
Date
DD/MM/YYYY
Qualification (AFSL or accountant)
SMSF
Name of SMSF Trustee and SMSF
Property being purchased/refinanced (or general details of the type of property to be purchased including purchase price range)
005-656 260115
Page 3 of 3
29
2.3 Commonwealth Bank Services
The diagram below outlines the range of services we can offer or arrange for SuperGear investors at competitive rates.
Financial
Advisory
Services
• Insurance
– Life Insurance
–Property
Insurance
• Equity Products/
Broking and
Advisory Services
• Private Banking
Services
Set-up
Lending
• Set-up SMSF
• Loan Approval,
Pricing and
Funding
• Establish the
pre-packaged
SuperGear
operating
structure to
integrate with an
existing SMSF
Ongoing Support
& Administration
• SMSF Administration
Services
• Ongoing Financial
Planning and
Advisory Services
• Loan Management
and Review
• Custodial Services
• Wealth
Management
Services
If you require additional information or would like to commence your SuperGear Application, please contact the
Commonwealth Bank as outlined in the table below:
Call 13 1998
24 hours a day,
365 days a year
OR
Refer to
www.commbank.com.au/supergear
If you currently use our banking services
please contact your Relationship Manager or Private Banker.
ADB3476 270115
i