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Hi
I wonder if you could help.
SF created bare trust (SF member is the bare trustee)
so that it could hold a bank account (apparently the interest rate is high). The bank account is in the name of the bare trustee (SF member).
Can you confirm that this is an in-house asset (Related Party Bare Trust)?
There is a breach of s.71 as there is no LRBA?
What about the highlighted below. Is this regarding a SF investing into an ADI directly (ie. Not through a bare trust, therefore the above bare trust arrangement is an in-house asset issue?)
Thanks!
Hi M.J.
My understanding is that a SMSF can have an investment held via a bare trust when a borrowing is not involved and the asset will not be an in-house asset.
The only time I have seen this in practice was when a SMSF acquired a property overseas with no borrowings. A bare trust was established as the property had to be held in individual names. In this example the SMSF had a corporate trustee so a bare trust was established. Lawyers recommended a bare trust in this example.
The regulation that the auditor is reviewing is 4.09A that requires:
"The assets of the SMSF must be held separately from any assets held by the trustee
personally or by a standard employer sponsor or an associate of the standard employer
sponsor".
As auditor you will need to review the bare trust agreement and this should have been prepared by a lawyer.
DBA Lawyers have a brief article re bare trust deeds where there are no borrowings and that can be found at:
If any other forum members have a view please let the forum know.
Thanks
The Auditors Institute