So you’ve set up your self-managed super fund, you’ve found a property, and you’re ready to make an offer. Before you sign the contract of sale, make sure you’ve set up your Bare Trust if you’re borrowing money via a Limited Recourse Borrowing Arrangement (LRBA) to purchase the property. Depending on which state you purchase in, executing the contract of sale incorrectly may result in double stamp duty, so check with your solicitor.
What Is a Bare Trust?
A Bare Trust is a legal shell that holds the property title while the SMSF pays off the LRBA loan. The beneficial ownership is still the SMSF. The Bare Trust quarantines the asset from the other assets in the fund, and once the LRBA is paid off, the title transfers to the SMSF and the trust is laid bare. A Bare Trust must be established should you need to borrow money via an LRBA loan, also known as an SMSF Loan.
How a Bare Trust Fits Into an LRBA
The table below outlines how the Bare Trust interacts with your SMSF structure. The trustee of the Bare Trust is recorded on the property title and is the entity that enters into the mortgage under the Limited Recourse Borrowing Arrangement (LRBA). As the debt is specifically structured as an LRBA facility, the trustee of the SMSF must be a separate entity from the trustee of the Bare Trust.
The Contract of Sale is executed in the name of the Bare Trust, with the lease agreement also entered into by the Bare Trust trustee. Under this structure, the lender’s primary recourse is limited to the property held within the Bare Trust, helping protect the remaining assets held by your SMSF.
It is important to note, however, that lenders will generally require personal guarantees from the SMSF members. In most cases, lenders will also require you to obtain independent legal advice to ensure you fully understand the obligations and risks associated with providing these guarantees. While the LRBA structure limits the lender’s recourse against other SMSF assets, personal guarantees may still expose guarantors to additional liability in the event of default.
Once the loan has been fully repaid, legal ownership of the property can then be transferred from the Bare Trust to the SMSF trustee.
At SMSF Mecca, our role as your finance broker is to identify and negotiate the most suitable lending solutions aligned with your financial position and long-term objectives. We conduct a comprehensive market review, leverage our lender network, and provide you with a detailed comparison report together with our recommendation for your consideration.
It is important to understand that major banks such as NAB and Westpac have largely exited the SMSF lending market and have grandfathered their existing SMSF lending products. Today, many lenders operating in this space distribute their products exclusively through accredited broker networks rather than dealing directly with clients. As a result, attempting to arrange an SMSF loan independently may significantly limit your available options and increase the risk of entering into a facility that may not be the most competitive or strategically aligned with your goals. So we encourage you not to DIY without the support of professionals.
With more than 20,000 brokers operating across Australia, selecting the right broker with specialist SMSF lending expertise is critical. SMSF lending is a highly specialised area, requiring a strong understanding of lender policy, structuring requirements, servicing methodology, and compliance considerations.
We also believe it is essential to work collaboratively with your Financial Planner and Accountant throughout the process. Where appropriate, we regularly coordinate joint discussions with your advisers to ensure all parties remain aligned and that the lending strategy complements your broader financial and investment objectives.
Want to Know How Much Your SMSF Can Borrow?
Before your bare trust is set up, it’s worth understanding your borrowing capacity first. Use our free SMSF Loan Calculator or book a strategy call with our team — we’ll assess your borrowing power inside and outside of super.
One Trust Per Property - The Single Acquirable Asset Rule
A Single Acquirable Asset (SAA) is a key requirement of an SMSF Limited Recourse Borrowing Arrangement (LRBA). Under the SIS Act, an SMSF can only borrow to acquire a single asset.
In simple terms, the loan must relate to one clearly identifiable asset that can be separately sold. Most commonly, this is a single commercial or residential property purchased within the SMSF structure.
For example:
- A single commercial warehouse on one title would generally qualify as a Single Acquirable Asset.
- Multiple units on separate titles would usually be considered separate assets and may require separate borrowing arrangements.
- A property with a separate car park title may qualify, depending if the car park can’t be sold independently.
Once debt is reduced, and should the property appreciate in value, it’s important to be aware that you can’t cross-collateralise the property to purchase a new property or cash out to purchase any other assets. Once the LRBA is paid down, the only way to access the equity is by liquidating the property.
The purpose of the Single Acquirable Asset rule is to ensure the borrowing arrangement remains limited in scope and risk within the superannuation environment. Because the borrowing is structured as a Limited Recourse Borrowing Arrangement, the lender’s security and recourse are generally limited to that specific asset held within the Bare Trust.
It is also important to understand that improvements and renovations to the property are restricted under LRBA rules. Borrowed funds generally cannot be used to fundamentally change the nature of the asset. For example:
- Cosmetic renovations or repairs may be permitted using SMSF cash.
- Constructing a new dwelling or subdividing land may breach the Single Acquirable Asset rules and trigger compliance issues.
Given the complexity of these rules, it is essential to obtain advice from your Accountant and Financial Planner prior to entering into an SMSF purchase or undertaking any future improvements to the asset.
Setting Up - Timing, Costs and the Lender's Role
Timing is critical when establishing an SMSF Bare Trust structure. In most states, the Bare Trust and trustee company should be established before or at the same time as signing the Contract of Sale. Incorrect timing can create significant issues with lender acceptance, stamp duty treatment, and compliance with SMSF borrowing rules.
The typical setup cost for an SMSF Bare Trust structure ranges from approximately $880 to $1,500, depending on the provider and complexity of the structure. This usually includes:
- Preparation of the Bare Trust deed
- Registration of a new corporate trustee with ASIC
- Trustee resolutions and meeting minutes
- Updated SMSF investment strategy documentation
- Certified copies required by lenders and solicitors
Most specialist SMSF lenders, particularly non-bank lenders active in the LRBA market, have very specific requirements regarding how the Bare Trust is established and documented. Some lenders even require the use of their preferred Bare Trust wording or template structure.
This is where working with an experienced SMSF broker becomes critical. An accredited broker coordinates directly with the lender, solicitor, accountant, and Bare Trust provider to ensure the structure complies with lender policy from the outset. Attempting to establish the structure without proper guidance can result in costly delays, declined applications, or contract complications.
Most specialist providers can establish the Bare Trust and trustee company within one business day where urgent turnaround is required.
What Happens When the Loan Is Paid Off?
Once the LRBA loan has been fully repaid, legal ownership of the property is typically transferred from the Bare Trustee to the SMSF Trustee. At this stage, the SMSF already holds the beneficial ownership of the property, so the transfer generally represents a change in legal title only rather than a change in underlying ownership.
In many states, this means additional stamp duty is not usually payable on the transfer, provided the structure was established correctly from the outset. However, stamp duty treatment can vary between jurisdictions, and it is essential to obtain confirmation from your solicitor or conveyancer before proceeding with the transfer.
Following the transfer, the Bare Trust is generally wound up and relevant notifications are made to the Titles Office and other relevant authorities.
Importantly, while the Bare Trust itself is usually retired, the trustee company may often be retained for future SMSF property transactions or other strategic purposes, subject to legal and accounting advice.
Required Compliance Documents
We’ll send you a tailored checklist to ensure a smooth process, however below is a sample list of what we require to assist with finding a suitable LRBA loan:
☐ Certified Bare Trust Deed with the address of the property being purchased
☐ Certified SMSF Trust Deed
☐ ASIC Registration Documents for Corporate Trustees
☐ Certified Identification Documents for Trustees and Members
☐ Contract of Sale and lease agreement
☐ Industry superfund statements or Cash Management Account if an existing SMSF
☐ Audited SMSF accountant prepared financials if existing SMSF
☐ Financial records – Payslips, tax returns and or business financials
☐ Independent Legal Advice, Solicitors Certificate – Once approved
☐ Certificate of Currency (Insurance), noting the replacement value, and noting the lender as the interested party
Frequently Asked Questions
Does every SMSF property purchase need a bare trust?
Only if the SMSF is borrowing to purchase the property. If your fund buys outright (no loan), no bare trust is required. The bare trust is specifically a requirement of the Limited Recourse Borrowing Arrangement (LRBA) structure.
Can I use the same bare trust for multiple SMSF properties?
No. Under SIS Act rules, each LRBA must relate to a single acquirable asset. Each property purchased with borrowed funds requires its own bare trust. The same bare trustee company can act for multiple trusts, but each trust is a separate legal structure tied to one property and one title.
Who sets up the bare trust — the broker, accountant, or solicitor?
Typically, your SMSF accountant or lawyer prepares the bare trust deed and trustee company. Your SMSF broker (such as SMSF Mecca Finance) coordinates the timing to align with the lender’s documentation requirements, particularly important with non-bank lenders who may require their own bare trust templates.
What are the stamp duty implications of setting up a bare trust in Victoria?
In Victoria, no stamp duty is payable on the bare trust deed itself, which is an advantage over some other states. Once the loan is fully repaid and the title transfers from the bare trustee to the SMSF trustee, the transfer is generally also exempt from stamp duty as beneficial ownership has not changed. Always confirm with a property solicitor before settlement.
What happens to the bare trust once the SMSF loan is fully repaid?
The property title is transferred from the bare trustee to the SMSF trustee, usually by a conveyancer or solicitor. The titles office is notified of the change. The bare trust is then wound up. The trustee company can be retained if your fund plans to purchase additional properties using borrowed funds in future. In practice, most SMSF lawyers and lenders recommend establishing a new Bare Trust for each new LRBA purchase. Speak to your lawyer to seek advice.
Ready to Buy Property Through Your SMSF?
At SMSF Mecca Finance, we specialise exclusively in SMSF lending across Melbourne and Australia. We coordinate the full bare trust process alongside your accountant and lender, so nothing falls through the cracks.