SMSF members should not attempt to avoid the use of a bare trust when entering into a limited recourse borrowing arrangement (LRBA) with a specialist adviser noting they are the simplest and most suitable structure for these circumstances.
SMSF Alliance principal David Busoli pointed out a bare trust was an entity that holds property for another party and since it required no Australian business number, tax file number or bank account could hold 100 per cent beneficial ownership of an SMSF asset purchased under an LRBA.
“A couple of points on this, because we have people say ‘I’m going to use the same corporate trustee for the fund as for the bare trust because that’s going to save us a dollar’ and if they do that where you have the same trustee for the fund as for the trust, no trust exists. The asset is held by the fund,” Busoli told practitioners at the recent SMSF Association National Conference 2026 in Adelaide.
He added having a bare trust was also important when signing the purchase contract for the asset under the LRBA.
“I take a pretty straight line with this as there are all sorts of variations on a theme and people say you can do this or that or use a nominee,” he said.
“The problem you’ve got is if you don’t do the contract and trust in a particular sequence, even though you might get away with it now, it may well [be an issue] when you’ve paid off the property and want to move it back into the super fund.
“The stamp duty office will say you can get your stamp duty concession provided you did it right in the first place so show us the evidence, and if you stuff that up a bit you could be liable for the full amount of stamp duty.
“Let’s pretend there is only one way of doing this and [that is to] sign the contract in the bare trust’s name.
“Don’t muck around with nominees, sign in the trust’s name and ask the mortgage or loan provider how they want it done.
“Some of them want it done slightly differently but at the end of the day it’s the bare trust they will be dealing with so keep it simple.”
