SMSF Eligibility

SMSF trustees should note that SMSFs are generally prohibited from borrowing under the Superannuation Industry (Supervision) Act 1993 (SIS Act). However, under the SIS Act, a SMSF trustee is permitted to borrow money under an arrangement that relevantly has the following features:

• the borrowing is used to acquire an asset;
• the asset is held on trust so that the SMSF trustee acquires a beneficial interest in the asset;
• the SMSF trustee has a right to acquire legal ownership of the asset by making one or more payments after acquiring the beneficial interest (for example, by repaying the borrowed amount);
• the lender’s recourse against the SMSF trustee in the event of a default on the borrowing and related fees is limited to the rights relating to the asset at the relevant time. These rights may include taking possession of, or disposing of, the relevant asset;
• aside from the lender's rights against the SMSF trustee as described in
• the asset is not subject to any charge (including a mortgage, lien or other encumbrance); and
• the asset must be one which the SMSF trustee is permitted to acquire and hold directly.

The SMSF trustee must also ensure that it complies with other investment restrictions, such as restrictions on in-house assets and acquiring certain assets from a related party of the SMSF. The SMSF trustee must also ensure that any investment in products offered by Sequoia Specialist Investments (such as units (Units) in a Deferred Purchase Agreement (DPA)) is permitted under the governing rules of the SMSF and complies with the investment strategy of the SMSF.

Why are SMSFs eligible to Invest

As per the SIS borrowing requirements outlined above. Units available in products offered by Sequoia Specialist Investments are deemed to be the “asset”. These Units are then held on separate trust for investors by Sequoia Nominees No.1 Pty Ltd (the Custodian) and are not held directly by investors. In this way, the investor has a beneficial interest in the Units held for them by the Custodian. The investor can obtain legal title to the Units by repaying the loan in accordance with the terms of the Master PDS/IM associated with your investment.

In this way, the Units and loan are structured to satisfy the requirements for a SIS-compliant borrowing arrangement.

This is general information only. If you are thinking making an investment in the Units via an SMSF, you should read the relevant disclosure document and obtain independent advice on whether investment in the Units is right for your SMSF.