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Dear Colleague,
SMSF is already having one proeprty having LRBA.
They are purchasing a second property. ( having LRBA)
The first bare trust has a corporate trustee.
Can the same corporate trustee be the trustee for the second bare trust?
Do we have to form another company as the trustee?
Thanks for the question.
As you allude to in the question, one of the requirements to be satisifed under a Limited Recourse Borrowing Arrangement ('LRBA') is that the legal title of the asset funded by the borrowing is held on trust (other than by the trustee of the super fund, ordinarily an SMSF). This is often referred to as a bare trust arrangement.
The one company could be the bare trustee of multiple bare trusts in respect of the same SMSF. The challenge is to ensure that the documentation reflects that there is a seperate bare trust arrangement in place in relation to each single acquirable asset funded by a different LRBA.
Consider the situation where there is only one bare trustee company holding the legal title to two different assets (under two seperate bare trust arrangments) acquired with borrowings under two seperate LRBAs. If hypothetically, the SMSF defaulted in relation to LRBA #1 but not LRBA #2, you would want to be sure the asset held on trust by the company in relation to LRBA #2, was not at risk of being sold to pay out the lender in relation to LRBA #1.