What is Bare Trust?

A bare trust (also called a holding trust) is a legal structure where a separate trustee holds a property on behalf of the SMSF. It is required when an SMSF borrows to acquire an asset under a Limited Recourse Borrowing Arrangement (LRBA), as mandated under the Superannuation Industry (Supervision) Act 1993.

The purpose is to ensure that the lender’s rights are limited only to the asset being financed, protecting other SMSF assets.


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ORDER BARE TRUST

Setup Process

Four simple steps to start your journey with us

Bare Trust and/or Trustee

You need to setup the Bare Trustee (also known as Custodian Trustee) if not already setup and apply for Bare Trust. Generally requiredfor first property purchase.

1 day

Dating the Bare Trust

Dating rules for bare trust differs from state to state. We'll work closely with you to advise you the dating and signing instructions based on the state in which you are buying the asset.

1-2 days

Loan Approval

We guide you on the naming to be used on the contract of sale (state specific) and help you in finalising the Lender's loan unconditional approval.

1-2 weeks

Property Settlement & Stamping

Correct stamping is very important to avoid the stamp duty issues in the future. We guide you and assist you in completing the stamping as per respective state's laws.

2-3 weeks

Requirements

SMSF Details

Provide us the name of your SMSF to keep going

Property Details

Address of the Property you are buying 

Bank/Lender Name

Provide name and address, if your loan is not with us

Online Process

All details are completed online for faster processing

Order Bare Trust

Investment in Bare Trust

Bare Trust Setup

One off fee
Setting up Bare Trust Only $599
Setting up Corporate (Custodian) Trustee (if required) $880

Bare Trust Stamping

One off fee
Stamp Duty on Bare Trust (State Specific) $Actual
Stamping Service Fee (State Specific) Starts $149

Why Setup with GoSMSF

Advantages for going with GoSMSF - The Right Team

Fast Setup

For our existing SMSFs, we understand their setup. This familiarity enables us to move quicker on the setup and enables support.

SPEED

Smooth

When we manage your loan, we co-ordinate with the Mortgage Brokers, Conveyancer & Estate Agents to work together so you don't have to.

streamline

Support

Bare Trust process is complicated and differs state to state, hence we provide full support and guidance during the process.

guidance

Compliance 

Our structured processes and proactive approach ensure your SMSF meets all regulatory requirements at every stage for peace of mind.

Compliance


Frequently Asked Questions

How do I set up a bare trust for my SMSF property investment?

Setting up a bare trust involves:

• Establishing a separate trustee (bare trustee company or individual)

• Drafting a bare trust deed

• Identifying the beneficiary (SMSF)

• Ensuring the structure is in place before signing the property contract depending upon the state of purchase

Professional advice is critical, as errors at setup cannot be easily corrected later. Hence, consult with us before you start looking for the property in SMSF.

What is a Limited Recourse Borrowing Arrangement (LRBA)?

An LRBA is a borrowing structure that allows an SMSF to acquire a single asset using borrowed funds, where the lender’s recourse is limited to that asset only.

What are the costs associated with setting up a bare trust structure?

Costs typically include:

• Bare trust deed preparation

• Corporate trustee setup [mainly during buying the first property]

• Legal and advisory fees

• Stamp duty (if applicable in your state)

Who is responsible for the property's income, expenses, and deductions?

Although the property is held in the bare trust, the SMSF is the beneficial owner.

This means:

• Rental income is declared in the SMSF and credited to SMSF’s bank account

• Expenses and interest are paid and claimed in the tax return by the SMSF

• Tax obligations are handled through the SMSF

Can I use a bare trust to buy residential or commercial properties?

Yes, an SMSF can acquire both:

• Residential property (with strict related party restrictions)

• Commercial property (can be leased to a related business on arm’s length terms)

Can I have multiple properties in a single bare trust?

❌ No.

Each property must be held in a separate bare trust, as an LRBA is limited to a single acquirable asset.

What are the common mistakes to avoid when using a bare trust for SMSF property investment?

Common mistakes include:

• Signing property contracts in the wrong name or dating the bare trust incorrectly. This is why it is very important to seek professional advice during this process. Seek our help before you commit to any purchase.

• Incorrect trustee structure

• Mixing assets in one trust

• Failing to meet arm’s length requirements

• Poor loan structuring. We are experts in SMSF loan structures and guide you to

These errors can result in compliance breaches and significant costs.

Does an SMSF bare trust need to be stamped?

Yes, in some Australian states and territories, a bare trust deed must be stamped with the relevant state revenue authority.

Stamp duty requirements vary by jurisdiction:

• Some states charge nominal duty on the trust deed

• Others may impose additional duty if documentation is incorrect or delayed

Importantly, timely stamping is critical. Failure to stamp within the prescribed timeframe can result in:

• Penalties and interest

• Potential complications when transferring legal title later

It is essential to ensure the deed is correctly drafted and stamped in accordance with state laws at the time of establishment.

Who should act as the bare trustee?

The bare trustee is the legal owner of the property on behalf of the SMSF. It can be:

• A special purpose company (recommended), or

• An individual trustee (less preferred)

A corporate bare trustee is generally preferred because it:

• Provides clear separation of legal ownership

• Simplifies administration and future transfer of title

• Reduces risk in case of changes to individuals

Can the SMSF trustee and bare trustee be the same?

❌ No, they must be separate legal entities.

The SMSF trustee represents the beneficial owner, while the bare trustee holds the legal title. Keeping them separate is essential to comply with LRBA requirements and to maintain the limited recourse nature of the loan.

Can I live in an SMSF property held in a bare trust?

❌ No.

SMSF assets must comply with the sole purpose test, meaning they can only be used to provide retirement benefits.

For residential property:

• Members and related parties cannot live in the property

• It cannot be rented to related parties

Breaching this rule can lead to serious penalties under the Superannuation Industry (Supervision) Act 1993.

Can I renovate or improve the property?

There is an important distinction:

• ✅ Repairs and maintenance (e.g. fixing a roof, repainting) are allowed

• ❌ Improvements that change the nature of the asset (e.g. adding rooms, subdivision) are not allowed under LRBA rules

The property must remain the same single acquirable asset. Any significant change could breach compliance rules.

Can I refinance an SMSF loan?

Yes, refinancing is permitted provided:

• The new loan continues to meet LRBA requirements

• The asset remains the same

• The structure (bare trust) remains intact

• It is a dollar to dollar refinance i.e. you can’t cashout or release equity from the refinance

Care must be taken to ensure compliance is maintained throughout the refinancing process.

What happens when the loan is fully repaid?

Once the loan is repaid:

• The SMSF gains full control over the asset

• Legal title can be transferred from the bare trustee to the SMSF trustee

However, this transfer must be handled carefully to:

• Avoid unnecessary stamp duty

• Ensure proper documentation

In some cases, leaving the title unchanged may also be considered.

Can I change the property held in a bare trust?

❌ No.

An LRBA is limited to a single identifiable asset. Once established:

• The property cannot be replaced

• A new property would require a new bare trust and loan structure

Is GST applicable on SMSF property purchases?

GST depends on the nature of the property:

• Residential property → generally no GST

• New residential or commercial property → GST may apply

Additional GST considerations include:

• Going concern exemptions

• Input tax credits

Professional tax advice is essential before entering into a transaction.

How is the property titled?

The property is registered in the name of:

👉 Bare Trustee as trustee for the Bare Trust [For LRBA properties]

This reflects:

• Legal ownership → bare trustee

• Beneficial ownership → SMSF

Correct titling is critical to ensure compliance and avoid legal issues.

Can I use personal funds to support the SMSF loan?

Yes, but within strict limits:

Allowed:

• Providing a personal guarantee to the lender

• Making additional contributions to the SMSF

Not allowed:

• Directly paying loan expenses personally

• Mixing personal and SMSF funds

All transactions must remain clearly separated.

What documents are required for a bare trust setup?

Key documents include: • Bare trust deed

• SMSF trust deed

• Corporate trustee documents (if applicable)

• Loan agreement and facility documents

• Property contract/address (state dependent)

Accuracy and consistency across documents are essential to avoid compliance issues.

Can an SMSF invest in overseas property using a bare trust?

Yes, but it is significantly more complex due to:

• Foreign legal systems

• Tax implications in multiple jurisdictions

• Lending restrictions

Most lenders in Australia do not support overseas SMSF property purchases, making this option less common.

What happens if the bare trust is set up incorrectly?

Incorrect setup can lead to serious consequences, including:

• Breach of SMSF compliance rules

• Loss of limited recourse protection

• Tax penalties and potential disqualification

• Payment of double stamp duty

In many cases, errors cannot be easily corrected and may require restructuring, which can be costly.

How long does it take to set up a bare trust?

Typically, a bare trust can be established within 1-2 business days, depending on:

• Documentation requirements

• Trustee structure

• Legal review process

It is critical that the bare trust requirements are understood and discussed with us before signing the property contract.

Do I need a separate bank account for the bare trust?

No, in most cases a separate bank account is not required as SMSF is the beneficial owner and all transactions are done from the SMSF bank account to:

• Manage property-related income and expenses

• Maintain clear separation of funds

• Support audit and compliance requirements

This ensures transparency and proper record-keeping.

Do you assist with bare trust setup and compliance?

Yes, we provide comprehensive support including:

• Structuring and establishing the bare trust

• Preparing all required legal documentation

• Ensuring compliance with SMSF and LRBA rules

• Coordinating with lenders, solicitors, and other professionals

We also provide ongoing SMSF administration support to ensure your structure remains compliant over time.