Who is this for?
Westpac SFIs could be suitable for individual investors or self-managed superannuation funds (SMSFs) wanting to increase their exposure to the Australian share market without the worry of margin calls.
To be eligible, the applicant must be:
- an individual or joint individuals who are over 18 years of age and an Australian resident for tax purposes; or
- an Australian company; or
- an Australian company or individual trustee of a family, discretionary or testamentary trust.
Key benefits for your client
Less upfront costs
The Westpac SFIs allow your client to purchase ASX-listed securities (usually top 50 by market capitalisation) and certain exchange traded funds in two instalments. By borrowing to invest, your client doesn’t need to outlay as much capital upfront and can make an optional second payment via a loan amount.
The benefits of owning ASX listed securities
ASX listed securities generally provide capital growth through rising share and unit prices over the long term. Your clients receive many of the benefits of ownership of listed securities, including dividends or distributions and franking credits (subject to eligibility).
Can be traded on the ASX
Buying and selling Westpac SFIs is easy and accessible. Investors can buy and sell them directly on the ASX through a broker or apply to Westpac without any need for a separate loan application or credit check.
No margin calls
As the holder of Westpac SFIs, your client will never be subject to margin calls with respect to the Loan.
Any dividends are automatically used to reduce the Loan amount and annual interest payments are automatically added to the Loan. The client can choose to pay the second instalment or sell the SFIs at the end of the Term.
Interest payments may be tax deductible and franking credits are issued with dividend payments. Please refer to the detailed tax section of the PDS.
Suitable for SMSFs
Westpac Self-Funding Instalments are eligible geared investments for SMSFs.
There are a number of associated risks with Self-Funding Instalments, as summarised below. Read the Product Disclosure Statement for a more detailed summary including general risks associated with geared investing.
- Gearing magnifies losses as well as gains.
- The gearing level may change materially as the price of the Underlying Security and the Loan amount change throughout the Term. If the price of the Underlying Security falls, the price of the Westpac SFI will generally fall.
- The interest capitalised to the Loan may be higher than the dividends or distributions received from the underlying securities, causing the Loan amount to increase.
- Any rise in interest rates will increase the amount added to the Loan as interest.
- Investors should consider the taxation consequences and seek professional tax advice on any taxation matters.
What are the fees and charges?
When your client acquires a Westpac SFI, they pay the Initial Interest Amount. On each Annual Interest Date, they automatically pay an Interest Amount through an increase in the Loan Amount, which is variable. The Initial Interest Amount is also variable and takes into account factors such as the volatility and liquidity of the Underlying Security, and the costs associated with Westpac's hedging arrangements in connection with Westpac SFIs. Read the Product Disclosure Statement for the interest definitions.
- Buy from Westpac as a Cash Applicant: Make the First Payment in cash.
- Buy from Westpac as a Securityholder Applicant : Transfer securities that they already hold to the Security Trustee and receive the Securityholder Cash Back (if any). This option is not available to SMSF investors.
- Buy from Westpac as a Rollover Applicant: Roll Existing Westpac SFIs into a new Series of Westpac SFIs over the same Underlying Securities (if available).
- Buy the Westpac SFIs on the ASX through a broker.
Options during the Term
- Sell the Westpac SFIs on the ASX.
- Make the Completion Payment (repay the Loan) and take full legal title to the Underlying Securities.
- Roll Existing Westpac SFIs into a new Series of Westpac SFIs over the same Underlying Securities (if available).
Options at Completion
- Do nothing – Westpac will sell the Underlying SecuritIES, pay off the Loan and then pay the net proceeds (if any) to the investor.
- Make the Completion Payment – repay the Loan and take full legal title to the Underlying Securities.
- Roll into a new Series of Westpac SFIs over the same Underlying Securities (if available).
Adviser service fees
Clients may request to use the ‘Adviser Service Fee Facility’ as a simple way to pay fees to their financial adviser. Under the Adviser Service Fee Facility, they appoint Westpac and the nominee as their agents to pay to the adviser on behalf of the specified Adviser Service Fee amount. Westpac does not keep any portion of the Adviser Service Fee.
Adviser Service Fees can be paid as a single upfront payment and as periodic payments. The client must complete the instruction form in order to set up this facility.