What Information is Required to Set Up a Bare Trust for Your SMSF?

A Bare Trust, also called a Custodian Trust, is a key legal structure for Self-Managed Super Funds (SMSFs) when borrowing to invest in property.

Bare trusts are only required if the SMSF intends to take out a loan, either from a bank or a related party acting as a lender. They are not necessary for cash purchases. The trust is established to hold the property purchased under a Limited Recourse Borrowing Arrangement (LRBA), ensuring the SMSF remains compliant with superannuation laws and the Australian Taxation Office (ATO) requirements.

When is an SMSF Bare Trust Set Up?

The bare trust is only established once the property that the SMSF plans to purchase has been identified. This ensures that the trust deed can specifically reference the property, which is a legal requirement for the arrangement. Setting up a bare trust is a relatively quick process and can often be completed within a few hours once all necessary details are provided.

Bare Trust for your SMSF

Information Needed to Set Up a Bare Trust

To set up a bare trust, trustees must supply accurate property, bank, and loan details. Property details include the full address, lot number, title reference, and plan reference. This ensures that the trust deed specifically identifies the asset being purchased.

Bank details are also required. Trustees need to provide the lender’s name, company name and Australian Company Number (ACN), and the lender’s registered address. This is essential whether the loan is from a traditional financial institution or a related party acting as the lender.

Loan information must also be supplied, including the total purchase price, the loan amount, the term of the loan in years, and the settlement date. Accurate financial information helps ensure the arrangement complies with arm’s-length and commercial terms, which are critical under ATO LRBA rules.

Summary

A bare trust is an essential component for SMSF property investments financed through borrowing. Trustees must provide detailed property, bank, and loan information to set up the trust quickly and correctly.

While setting up a bare trust is straightforward, professional guidance is strongly recommended. Accountants or SMSF specialists can ensure that the trust deed is drafted correctly, includes all necessary references, and meets both legal and regulatory requirements. Properly establishing the trust protects the SMSF’s property investment, avoids compliance breaches, and ensures that the borrowing arrangement is legally enforceable.

Working with qualified professionals ensures the SMSF remains compliant, protects the investment, and adheres to all LRBA requirements, supporting the fund’s long-term retirement goals.

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(GENERAL INFORMATION ONLY)

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DISCLAIMER: This article is provided for general information and educational purposes only. It does not constitute financial, legal, tax, investment, or other professional advice and has been prepared without taking into account your personal objectives, financial situation, or needs. This article may include perspectives from industry contributors. Contributor participation does not imply endorsement, recommendation, or preferred referral status. While reasonable care has been taken in preparing this content, no representation or warranty is made as to its accuracy, completeness, or currency. SMSF Intelligence does not accept liability for any loss or damage arising from reliance on this information or any linked materials. SMSF Intelligence does not provide financial, legal, or tax advice. Before making any decisions, you should consider the appropriateness of the information in light of your circumstances and seek advice from a suitably qualified and licensed professional.