SMSF bare trusts explained: what they are and when you need one
If investing in commercial or residential property is part of your self-managed super fund’s (SMSF) investment strategy, there are a few additional steps that must be taken. For instance, if you need to take out a loan to purchase, you’ll need to consider the structure known as a Bare Trust.
If your self-managed super fund (SMSF) is borrowing to buy eligible commercial property, you'll generally need a bare trust as part of the borrowing structure.
Here's what a bare trust is, how it works and what to know before setting one up.
What is a bare trust?
A bare trust (also called a holding trust) is a legal structure used with a limited recourse borrowing arrangement (LRBA).
The bare trust temporarily holds legal ownership of the property while the SMSF has the beneficial interest in the asset. Once the loan is repaid, ownership can generally be transferred to the SMSF trustee.
Why is a bare trust needed?
SMSFs usually can’t borrow money.
An LRBA is a limited exception that allows an SMSF to borrow to buy an eligible asset. As part of that arrangement, the property must usually be held by a separate holding trustee through a bare trust.
If the loan defaults, the lender's rights are generally limited to the property held in the bare trust, rather than the SMSF's other assets.
Important 2026 update
The rules around SMSF borrowing are changing.
Once the new legislation commences:
SMSFs will no longer be able to enter into new LRBAs to purchase residential property
Existing residential property LRBAs will be grandfathered
Borrowing for eligible commercial property will continue to be available, subject to legislative requirements and lender approval
If you're considering borrowing through your SMSF, it's important to understand the current rules before signing contracts or arranging finance.
Setting up a bare trust
Before purchasing a property, you'll generally need to:
Confirm your SMSF trust deed allows borrowing
Choose the property and lender
Establish the bare trust before signing contracts or paying deposits
Prepare the required legal documents
Complete the transaction through the LRBA structure
Because timing is important, trustees should obtain financial, legal and tax advice before entering into an LRBA.
Bare trust fees
The cost of setting up a bare trust depends on the provider and the complexity of the structure.
Stake Super Property charges a one-off fee of A$1,199 (including GST) to establish a bare trust. This includes:
ASIC registration of the holding trustee company
Preparation of the bare trust deed
Establishment documentation required for the structure
What happens when the loan is repaid?
Once the LRBA has been repaid, the property can generally be transferred from the bare trustee to the SMSF trustee.
In some cases, the property may remain in the bare trust.
Stamp duty treatment varies between states and territories, so trustees should get legal advice before transferring title.
What to consider before setting up a bare trust
Before proceeding, trustees should consider whether:
The SMSF trust deed permits borrowing
The investment strategy supports the purchase
The property is eligible under the LRBA rules
The fund has enough liquidity to meet repayments and ongoing costs
They've obtained independent financial, legal and tax advice
How Stake Super can help
If you're purchasing eligible commercial property through your SMSF, Stake Super can help with the admin required to set up the borrowing structure, including the bare trust documentation and company registration.
We'll work with you every step of the way so your SMSF is ready to complete the purchase.
Ready to invest in commercial property through your SMSF?
Whether you're planning your purchase or simply need help setting up an LRBA, we're here to help.
Speak to a Stake Super specialist or get started online.
Speak to a specialist
Want to know more about Stake Super or have questions? Speak to one of our SMSF professionals.
Bare trust SMSF FAQs
This is not financial product advice, nor a recommendation that a self-managed super fund (‘SMSF’) may be suitable for you. Your personal circumstances have not been taken into account. SMSFs have different risks and features compared to traditional superannuation funds regulated by the Australian Prudential Regulation Authority (‘APRA’). Stake SMSF Pty Ltd, trading as Stake Super, is not licensed to provide financial product advice under the Corporations Act. This specifically applies to any financial products which are established if you instruct Stake Super to set up an SMSF. When you sign up to Stake Super, you are contracting with Stake SMSF Pty Ltd who will assist in the establishment and administration of an SMSF under a ‘no advice model’. You will also be referred to Stakeshop Pty Ltd to enable your trading account and bank account to be set up in order to use the Stake Website and/or App. For more information about SMSFs, see our SMSF Risks page.
Commercial Manager - Stake Super
Ciara is a Commercial Manager at Stake Super, with over 10 years of experience in the SMSF industry and an MA in Accountancy and Finance from Heriot-Watt University in Edinburgh, United Kingdom. Having previously worked at a chartered accounting firm and one of the largest SMSF administrators in Australia, Ciara has extensive knowledge of SMSF compliance. She is also a current member of the SMSF Association.
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