What happens if the SMSF Trustee can’t legally own the asset?

Bare Trust Deed Book Cover
  • Bare Trust Deed

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A Trustee of Self-Managed Superannuation Fund is obliged to have all SMSF assets in its own name.

For example, the Nasution SMSF Fund owns a farm in Kyneton, Victoria. The Trustee of the Nasution SMSF is Camalot Pty Ltd. By law, the legal owner of the farm must be Camalot Pty Ltd. Legal title to SMSF assets must be held in name of the SMSF’s trustees.

But what happens if the trustee of the SMSF is not allowed to own the asset? For example, land in Indonesia and in the USA often can’t be owned by an Australian company.

Bare Trust to the rescue

A Bare Trust is required where SMSF trustees are practically unable to hold legal title to SMSF assets.

The ATO acknowledges this issue on its website (https://www.ato.gov.au/Super/Self-managed-super-funds/Investing/Ownership-and-protection-of-assets/ QC 23322)

The ATO states:

Assets unable to be held in fund’s name

An unavoidable restriction (such as state law) may prevent your SMSF from holding assets using the fund’s name.

If assets cannot be held in the fund’s name, ownership by the fund must be clearly established. You can do this by executing a caveat, or creating an instrument or declaration of trust to enable the fund to assert its ownership.

If possible, documents such as sale agreements should be executed in the name of the trustees ‘as trustees for’ the fund.

See: https://www.ato.gov.au/Super/Self-managed-super-funds/Investing/Ownership-and-protection-of-assets/

Build this Bare Trust. This is so that the SMSF has evidence that it is the trust owner. It complies with the ATO.

You get:

Our covering letter for your due diligence file
Bare trust deed


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