It is important for the validity of an SMSF LRBA for clients to execute (sign and date) their bare trust at the correct time. So when to date a bare trust deed for an SMSF borrowing?
You can set up your bare trust online here: Bare Trust.
When to date a bare trust deed?
The applicable date for a bare trust deed varies State by State.
The following table illustrates when the bare trust deed should be executed and the applicable duty to be paid.
The following summarises when to date a bare trust for an SMSF property purchase:
- QLD – Before or on contract date
- NSW – After contract date
- ACT – After contract date
- VIC – After contract date but before settlement
- TAS – After contract date
- SA – After contract date but before settlement
- WA – Before or on contract date
- NT – Before contract date
LRBA Frequently Asked Questions
The following article answers some common questions when it comes to buying property with super: Buying property with super – common questions
Questions include:
- What name should be on the property purchase contract for an LRBA?
- Does a company need to be used as trustee of a holding trust / bare trust for an SMSF borrowing?
- Can an SMSF buy a land and build a house / develop a property?
- How long does it take to set up an SMSF and LRBA structure?
- How much can can SMSF borrow?
- How much does it cost to set up an SMSF to buy property?
- Can I use my super to buy a house?
Limited recourse borrowing refresher
For those who have not yet jumped into the waters, an LRBA for a real estate purchase is when:
- the SMSF trustee borrows from a lender to buy property (in the event of default the rights of the lender must be limited to the property purchased),
- the SMSF trustee has an agreement with a holding trustee that the holding trustee will hold the property for the super fund (i.e. the bare trust deed covers the relationships), and
- the holding trustee enters into a contract and buys property from the vendor using money from the SMSF trustee.
Queensland and the NT are the odd ones out when it comes to when to date a bare trust deed. In QLD and the NT the bare trust deed is dated before the contracts are entered into, however in practice they can be signed on the same day.
10 comments
Amanda Chong
March 3, 2023 at 4:37 pm
Hi hi
I am in QLD and SMSF has been set up. As per your article. You mentioned that we need to execute the trust before enter contract in QLD.
Can I set up Bare Trust and Corporate Trust today and don’t execute the trust till I enter into a contract?
This mean I also don’t put any property address or title on Bare Trust Deed..
Then two weeks later, on Monday night 10pm the buyer accept my offer and we sign a contract.
What I understand is once we execute the bare trust we cannot change the deed details.
If I execute the bare trust on Monday (before or on the day sign contract). On the same day I sign the contract.
Can I request the solicitor to add the property details on Bare Trust deed on Tuesday(neXt day)? Will this be considered that we cannot change the Bare Trust after I executed on Monday?
I actually confused when to execute the bare trust? When to add property details on Bare Trust?
Appreciate if you could reply
Kris Kitto
March 6, 2023 at 9:29 am
Yes – it is tricky.
The bare trustee company needs to be registered before you enter any contract.
A trust is a relationship (between the trustee and beneficiaries) and it requires an asset (e.g. property). So the bare trust is created when you sign a contract in the name of the bare trustee company (on behalf of the SMSF as the beneficiary).
The bare trust deed document records the relationship between the parties.
The process we use with Grow SMSF clients for QLD properties is as follows:
1). We set up the bare trustee company (holding trustee) – this name goes on the contract –MORE INFO;
2). Once an offer has been accepted (but before the contract is signed) you send the contract to Grow;
3). Grow organises the bare trust deed (with details of the property);
4). You sign the bare trust deed;
5). You sign the contract;
Please do not overthink everything.
Simply ensure the date of execution of the bare trust deed is either BEFORE or the SAME DAY as the date on the contract.
Amanda
March 3, 2023 at 4:38 pm
I am in QLD and SMSF has been set up. As per your article. You mentioned that we need to execute the trust before entering a contract in QLD.
Can I set up Bare Trust and Corporate Trust today and don’t execute the trust till I enter into a contract?
This means I also don’t put any property address or title on Bare Trust Deed.
Then two weeks later, on Monday night at 10 pm, the buyer accepted my offer and we sign a contract.
What I understand is once we execute the bare trust we cannot change the deed details.
If I execute the bare trust on Monday (before or on the day sign contract). On the same day, I sign the contract.
Can I request the solicitor to add the property details on the Bare Trust deed on Tuesday(next day)? Will this be considered that we cannot change the Bare Trust after I executed it on Monday?
I actually confused about when to execute the bare trust. When to add property details on Bare Trust? Can I set up Bare Trust earlier before entering into a contract?
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Kris Kitto
April 13, 2023 at 10:14 am
VIC SRO has provided updated guidance (December 2022) regarding SMSF holdings trust (bare trusts): https://www.sro.vic.gov.au/limited-recourse-borrowing-arrangements-custodian-trusts-and-holding-trusts
Although previous guidance recommended executing the bare trust deed AFTER settlement had occurred, from a practical perspective, most lenders will require a signed and dated bare trust deed to be provided before the loan is approved and settlement occurs.
Aaron
July 10, 2023 at 6:42 pm
Hi,
Why does a bare trust deed need to be dated after the date of the contract in NSW? Does that not open up a potential double transfer duty scenario as a purported sub-sale?
Kris Kitto
July 11, 2023 at 9:08 am
Seek you own legal advice, but the following article explains the technicalities:
https://brazelmoorelawyers.com.au/avoiding-double-stamp-duty-on-a-declaration-of-bare-trust-for-a-smsf-purchase-of-property/
Thor
July 31, 2024 at 2:26 pm
Hi,
Is the date to sign based on where the Trust is or where the property is located? If the bare Trust and Trustee company are in NSW and purchasing a QLD property, which one applies?
Kris Kitto
July 31, 2024 at 2:32 pm
Based on where the property is physically located.
In your example, QLD.
Interstate purchases can be tricky as different states have different rules. You must comply with the rules of the state the property is located otherwise potentially be faced with finance falling over, contract not completing, or be required to do another transfer and pay double-stamp duty!
Thor
July 31, 2024 at 6:57 pm
Thanks for that. Much appreciated, Kris!