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A and B are the individual trustees for ABC super fund . They set up a bare trust in 2008 and A is the trustee of the Bare trust . They purchased a property in Bare trust . Bare trust indicates that Property is holding 50% by A for superannuation Fund and 50% by A itself. When I do a title search and only A name was on title of the property . Super fund has been accounted only 50 5 ownership of property since 2008 . My question is
Is this ok to hold the property under bare trust without LRBA . is this in house asset ? Lawyer set up previously ...
Hi Monica
Yes a property purchased by a Fund (with no LRBA) should be purchased in the name of the trustee or trustees of the Fund. The property is held in the name of the trustee or trustees on behalf of the Fund.
Another option is to purchase a property via an ungeared unit trust under the SIS regulation 13.22C rules.
Thanks
SMSF AAA
Hi Monica
My view is the trustees of the Fund need to get legal advice to correct the ownership so that the Fund is the owner of the property (re its share) if there was never any LRBA in relation to the bare trust.
As your attached article states a bare trust would normally be considered to be a related party and would be an in-house asset of the Fund. The SIS legislation allows an exception to the in-house asset rules for an investment in a bare trust under sections 71(8) & 71(9) of SIS. These sections allow a Fund to invest in a bare trust where "the related trust is one described in paragraph 67A(1)(b) in connection with a borrowing".
If the LRBA has been repaid the property can remain in the bare trust (that the Fund invests in).
Thanks
SMSF AAA