SMSF Limited Recourse Loans (Bare Trust)
At Optima Super we assist trustees of an SMSF and their advisors enter into the purchase of property using finance provided by a third party lender (A Bank or by a related party). This is achieved by using a Bare Trust structure with a Corporate Trustee. A limited recourse loan is then set in place by the Bank or we can assist with a loan document if the funds are coming from a related party.
We attend to the preparation of the required documentation to enable an SMSF to enter into the purchase of real property. This includes the initial establishment of the Self-Managed Superannuation Fund if needed, and the establishment of the Bare Trust and corporate trustee. Our limited recourse loan package includes the necessary documents to meet the Superannuation Industry (Supervision) Act 1993 and also the financial institutions lending requirements.
The ATO describes a limited recourse borrowing arrangement (or Limited Recourse Loan or LRBA) as an arrangement where an SMSF trustee takes out a loan from a third party lender. The trustee then uses the loan funds to purchase an asset to be held in a separate trust. Any investment returns earned from the asset go to the SMSF. If the loan defaults, the lender’s rights are limited to the asset held in the separate trust. This means there is no recourse to the other assets held in the SMSF.
Our LRBA package includes :
– Deed and related minutes for the SMSF set up as well as application for the ABN and TFN (if the SMSF already exists this includes an upgrade to ensure that the deed allows for borrowing within the fund)
– Establishment of sole purpose corporate trustee for the SMSF (incl ASIC registration, Company Constitution, relevant minutes, etc)
– Bare Trust Deed
– Establishment of corporate trustee for the Bare Trust (incl ASIC registration, Company Constitution, relevant minutes, etc)
– Investment Strategy template
Email us with a request to call you and discuss.
Click Here – Limited Recourse Borrowing Arrangement (Bare Trust) Application Form.
See Diagram – Limited Recourse Borrowing Arrangement.
NOTE: It should be noted that this is a document preparation service.
Disclaimer. In providing this information, Optima Super is not making any recommendations as to whether the acquisition of an investment under a limited recourse borrowing arrangement is or is not a suitable investment for any particular superannuation fund. Trustees of super funds should obtain independent legal and financial advice as to whether the acquisition of an investment under a limited recourse borrowing arrangement is an appropriate investment for that fund.