Michael and Thu are trustees and members of their self-managed super fund (the UWS Fund). For the purposes of this assignment both Michael and Thu are Australian citizens and the UWS Fund is an Australian SMSF. As trustees of the UWS Fund, Michael and Thu are considering acquiring the asset listed in the term sheet in Schedule 1 of this document. Note: Schedule 1 will be different for each student and will be made available in the Case Study Folder on vUWS. Michael and Thu, as trustees, have not yet decided whether to acquire the asset:

using the assets of the UWS Fund; or

to borrow the funds necessary to acquire the asset; or

a combination of both.

Both the current financial position of the UWS Fund and the value of the asset to be acquired by the UWS Fund are specified in Schedule 1. Michael and Thu, as trustees, have been having some discussions with Australian Bank with a view to a potential loan to the UWS Fund. Michael and Thu have provided you, as their advisor, with a proposed term sheet for the loan, should they eventually decide to proceed with the loan. They put this term sheet together, having seen similar documents on Wastntime, a social media platform. Michael and Thu have not discussed the draft term sheet with Australian Bank at this stage. Your task is to advise Michael and Thu (as trustees).

The form of your advice will be a written memorandum discussing your suggested structure for the proposed acquisition of the asset and the pros and cons of that structure considering the Superannuation Industry (Supervision) Act 1993 (the SIS Act). You may consider that a diagram is helpful to supplement your advice. Note: The diagram will not be included in the word count.

You will need to specifically refer to the relevant sections of the SIS Act and the facts of Schedule 1 to justify your advice. You will also provide your comments on the proposed term sheet and whether the commercial terms proposed by Michael and Thu would be acceptable to the Commissioner in accordance with available guidance that the Commissioner has provided over the years. To the extent the terms may not be acceptable, you will need to make reference to any guidance provided by the Commissioner, propose changes to the commercial terms and be able to explain why you made the changes. You will have to use a spreadsheet and be familiar with the Microsoft Excel functions PMT and IPMT to create a term structure for the loan on a month-by-month basis. Note: your Unit Coordinator has posted an instructional video about how to make these calculations in Micosoft Excel. Michael and Thu have asked you to mark up your comments on the term sheet by hand (using a pen) and then scan your comments, together with your written memorandum (placed on top) in a PDF, and upload in Turnitin addressed to the Unit Coordinator who will then forward same to their legal counsel, SMSF Lawyers. You must do this by midnight 6 October 2023

Student G This is your Schedule 1 for the Case Study.

Fund Details

Fund Financials

Fund Value (cash at bank) $175,000.00

Asset Details

Asset Value $530,400.00

Type of Asset Listed Security

Vendor Jane Smith

Relationship of Vendor: not relative

Purchaser UWS Fund

Term Sheet

Lender :Australia Bank

Borrower: UWS Fund

Loan Amount (based on LTV) $350,064.00

Interest Rate (%) pa accrues monthly 7%

LTV % 66%

Term (years) 7.3

Expected income from asset (month) A $4,243.20

Concessional extra (per month) B $2,083.33

Fund Available for debt service (A+B) $6,326.53

Monthly repayments (based on Term, Interest Rate, Loan Amount) -$5,029.57

Security

Charge over trustee's shares in Fund: Yes

Charge over asset : Yes

Member personal guarantee: No