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Clare Evans

Jul 08, 2022

LRBA and Bare Trust

in SMSF Technical Forum

I have had two funds recently who have the Corporate trustee used as their Bare Trust also.

I have suggested altering the one, and trustees have indicated they don't want to change the property name to avoid stamp duty. Just wanted to verify that this would require a contravention?

One of those funds also has 2 loans against a property which appears to be a red flag to me. They have both been labelled LRBAs (which I have not yet verified). Has anyone else come across two LRBAs on the same property? Is there a scenario where that is acceptable?

Thanks in advance.

Clare

2 answers0 replies

Comments (2)

THE AUDITORS INSTITUTE

Jul 11, 2022

Hi Clare

SIS section 67A(1)(b) states that:

"the acquirable asset is held on trust so that the RSF trustee acquires a beneficial interest in the acquirable asset".

If the SMSF trustee is the same as the trustee of the bare trust my understanding is that the asset is not "held on trust" so would normally be a breach of the LRBA rules.

The legislation requires that the property when it is initially purchased is purchased not in the name of the Fund but in another entity being the bare trustee.

In relation to this I would request the legal advice obtained when the LRBA / bare trust was established. I would request an explanation from the Trustee of the Fund as to how they have complied with the SIS requirements in relation to the LRBA.

The legislation does allow a Fund to have a company (or individuals) be the trustee of the bare trust and that this company could do this for multiple properties that have a LRBA.

DBA Lawyers at their website have an article that addresses LRBA's & multiple bare trusts.

Thanks

SMSF AAA

Clare Evans

Jul 12, 2022

Replying to

Thank you very much for the help! :)