25/08/2009

An effective super gearing transaction requires the trustee of the super fund to provide all the funds necessary to purchase the asset.

Where the trustee of the super fund provides all funds necessary, stamp duty is payable on the initial purchase of the asset but the subsequent transfer from the custodian to the trustee of the super fund (once the loan is repaid) is stamp duty free (or only very nominal duty is charged).

Recently, we have seen several transactions where fund members or related parties have contributed to payment of the purchase price (for example, a member may pay an initial holding deposit or provide some of the settlement monies).  These payments, although sometimes very minimal, mean that the super fund has not provided all the funds to purchase the asset.  Accordingly, the super fund trustee may be required to pay double duty. 

If you are a trustee of a super fund and intend on entering into a gearing transaction, it is vital you ensure all purchase price monies are provided by the super fund (including money borrowed by the fund) and that you keep written records evidencing the super fund payments. If you have been involved in a gearing transaction and have used non-super fund cash to purchase the asset, it is important you seek legal advice as to how to deal with the non-fund payment.

If you have any questions or would like further advice on Super Gearing, please contact TOWNSENDS BUSINESS & CORPORATE LAWYERS on (02) 8296 6222.