Starting with the Basics: What Is a Bare Trust Trustee?
A trustee is the legal entity responsible for holding and managing assets on behalf of a trust’s beneficiaries. In the context of a Self-Managed Super Fund (SMSF), the trustee is responsible for ensuring the fund is run according to superannuation laws and the trust deed.
There are two types of trustees you can choose for your SMSF and Bare Trust:
👤 Individual Trustee:
- The members of the SMSF act as trustees in their personal capacity.
🏢 Corporate Trustee:
- A company acts as trustee, and the SMSF members are directors of that company.
Why a Corporate Trustee Is Favoured (Especially for Bare Trusts)
While individual trustees may seem simpler at first glance, corporate trustees are generally considered better for both SMSFs and Bare Trusts—especially when you’re investing in property.
✅ Advantages of Corporate Trustees:
| Benefit | Why It Matters |
| Compliance-friendly | Easier to meet ATO requirements and lender conditions |
| Continuity | Simpler to update if members leave or join the fund |
| Asset protection | Greater legal separation between personal and trust assets |
| Clear record-keeping | Less administrative confusion between personal and SMSF transactions |
| Banking and borrowing | Most lenders require a corporate trustee for Bare Trusts |
In contrast, individual trustees are:
- Slower and more complicated to update
- Limited number of members depending on the state/territory rules
- Higher risk of administrative error (and fines)
🔐 Pro tip: Most SMSF professionals and lenders strongly recommend using a corporate trustee for both your SMSF and Bare Trust—even if it means a higher upfront cost.
What Is a Bare Trust?
A Bare Trust (also known as a Holding Trust or Custodian Trust) is a special-purpose legal structure used when your SMSF wants to buy property using a loan.
In this setup:
- The Bare Trust holds the legal title to the property
- Your SMSF is the beneficial owner of the property
- Once the loan is paid off, legal ownership can be transferred to the SMSF
This structure is required under a Limited Recourse Borrowing Arrangement (LRBA), where the lender’s rights are limited to the asset purchased.
🏠 Bare Trusts are not optional if your SMSF is borrowing to buy property—they’re a legal requirement under section 67A of the Superannuation Industry (Supervision) Act 1993.
Why the Corporate Trustee for the Bare Trust Must Be Separate
This is where things can get confusing.
You must set up a separate corporate trustee for the Bare Trust. It cannot be the same company that acts as trustee for your SMSF.
Here’s why:
- It creates legal separation between the trust structures
- It satisfies lender requirements
- It ensures compliance with superannuation law
- It protects your SMSF if the property investment goes wrong
How to Choose a Good Name for Your Bare Trust and Corporate Trustee
Yes—naming matters. In fact, it matters a lot.
✅ For the Bare Trust:
- Include the name of your SMSF (e.g., “The ABC Super Fund Property Holding Trust”)
- Avoid generic names like “Investment Trust 1”
- Keep it consistent across legal documents, lender forms, and ASIC registrations
✅ For the Corporate Trustee:
- Choose something descriptive but professional (e.g., “ABC Custodian Pty Ltd”)
- Ensure it’s distinct from your SMSF’s corporate trustee
- Check name availability via ASIC’s register
When and Why Bare Trusts Are Needed
A Bare Trust is only used when your SMSF:
- Purchases a property using borrowed funds, and
- Holds the property under an LRBA until the loan is paid off
📌 Important Notes:
- The Bare Trust must be set up before signing a property contract.
- It can only hold one single acquirable asset (e.g., a property or a parcel of identical shares).
- Once the loan is paid, you may choose to transfer legal ownership to the SMSF—sometimes triggering stamp duty, depending on your state.
For New SMSF Investors: What You Should Know
If you’re just starting out, here are a few tips:
- Don’t go it alone. This process involves legal, tax, and lending implications.
- Expect setup costs for:
- The Bare Trust deed
- ASIC registration for the corporate trustee
- Professional advice and documentation review
- Timing is everything: Ensure everything, that can be, is structured before you sign a contract.
For Experienced SMSF Investors: Key Reminders
If this isn’t your first rodeo:
- Double-check that your existing Bare Trusts are compliant with the ATO’s latest interpretations
- Don’t reuse a corporate trustee for multiple Bare Trusts
When refinancing or restructuring, get legal advice before making changes
Final Thoughts: Get It Right from the Start
Bare Trusts and Corporate Trustees are essential pieces of the puzzle when it comes to borrowing within an SMSF. While it might seem like a lot of paperwork up front, getting it right can save you from costly compliance issues later.
🎯 A poorly set-up Bare Trust can lead to loan rejections, stamp duty traps, or even non-compliance with super laws—so don’t leave it to guesswork.
👉 Considering a property purchase through your SMSF?
Speak with a qualified financial adviser or SMSF specialist who can guide you through:
- ✅ Trust setup and naming conventions
- ✅ Structuring your SMSF and Bare Trust correctly
- ✅ Liaising with lenders and legal professionals
- ✅ Avoiding common compliance and tax traps
🔗 Helpful Resources
- ATO: Limited Recourse Borrowing Arrangements
- SMSF Association – Understanding Bare Trusts
- Starting an SMSF
Any discussion in this article does not take into account your objectives, financial situation or needs. Before acting on it, you should consider whether it’s appropriate to you, in light of your objectives, financial situation or needs.