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What Do You Need To Setup A Bare Trust

Bare Trust Requirements

Establishment of a bare trust set up is only required should you need to take out a loan (from a bank, private lender, or other source) for the purchase of a residential or commercial property through your SMSF.  If a residential property is sought for investment purposes, it cannot be your home, so you can’t live in it, use it as a weekender, or have a family member reside there.  In other words,  for investment of your SMSF only.

A bare trust set up can only be done once a property has been identified that the SMSF intends to purchase.  Please note also that the structure is one property per one trust.  If more investment properties are intended to be purchased, each property requires a new bare trust to be established.

Once an investment property has been decided on, we need to know the full legal description of the property, also the lender of purchase funds.  The lender’s identity is needed, as our legal team have several variations of the deed to satisfy different lending institution’s requirements.

If you haven’t already done so, it is essential that you establish the SMSF initially as a SMSF cannot borrow money, so the bare trust framework is set up to expedite the loan.

A corporate trustee can be set up as trustee for the bare trust, it would be beneficial to seek financial and/or legal advice as care is required to ensure there are no adverse GST, taxation or stamp duty consequences.

The legal & beneficial interests in the property must be separated, so that an entity apart from the SMSF trustee holds the legal title, while the SMSF trustee holds the beneficial interest.  The bare trust & corporate trustee are only legal entities for holding the investment property with all transactions taking place in the SMSF.

All operating & property related costs can be paid by the SMSF, with the property reverting back to the SMSF when the load is repaid.

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