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Campbell McCart

Jun 17, 2021

LEASING OF COMMERCIAL PROPERTY WITH LRB

in SMSF Technical Forum

BACKGROUND

Water Pty Ltd is the corporate trustee of Action Super Fund.
Via an LRB a property for $1,500,000 was acquired. The loan from NAB was $800,000.
As it is an LRB the property the property was acquired using a Bare Trust. with corporate trustee = Oxy Pty Ltd ATF Grass Property Custodian Trust.
The property id to be leased to external independent third party File Pty Ltd.

Question in what name should the lease be from:

A. Water Pty Ltd ATF Action Super fund or

B. Oxy Pty Ltd ATF Grass Property Custodian Trust

My opinion is B above. Due to the fact that when you do a Title search it is Property Custodian Trust that shows as the owner of the property. Your thoughts please and why.

1 comment

Comments (1)

THE AUDITORS INSTITUTE

Jun 17, 2021

Hi Campbell

I agree with you in that B is correct as the lease should be in the name of Oxy Pty Ltd ATF Grass Property Custodian Trust. That is the lease should be in the name of the trustee of the bare / custody trust. The reason for this is due to Section 67A of SIS requiring that "the acquirable asset is held on trust" where a Fund has borrowed money to acquire an asset (under a LRBA).

Thanks

SMSF AAA