Share
How to Handle Stamping of Bare Trust Deeds for SMSF Property Purchases?
 
 
   

How to Handle Stamping of Bare Trust Deeds for SMSF Property Purchases?

News | Mehak Gaba | Released: 24/09/2025 | Read: 5 Mins
https://stratus.campaign-image.com.au/images/27408000018747004_zc_v1_1756185310635_bring_forward_rule.png
   

 

1. Wrong name of Purchaser on Contract of Sale:  A wrong purchaser name on a property contract  can delay or derail settlement, void concessional stamp duty treatment, cause lenders to refuse finance, and may require replacement of the contract (or other legal fixes). Below are concrete example(s):
 
  • Buyer named as the SMSF (or SMSF trustee) instead of the bare trustee company.  
  • Contract names a member personally (e.g., “John Smith”) instead of the bare trustee company. 
  • Minor errors (misspelt name, missing middle name, missing/incorrect ACN).
  • Contract correctly names the bare trustee company as purchaser, but the bare trustee company was registered after the contract.
https://stratus.campaign-image.com.au/images/27408000018747004_zc_v1_1756185829394_bring_forward_cap_screenshot_2025_08_26_105309.png

 


2. Single Contract of Sale/Exchange for the asset being acquired:  For LRBA purposes, there must be a single Contract of Sale/Exchange naming the bare trustee company as purchaser. (Refer ATO Ruling- 

SMSFR 2012/1: This ATO ruling, gives us clear guidance on what qualifies as a “single acquirable asset” under an LRBA arrangement).

 

 

🔴 Incorrect — Multiple Contracts (Non-Compliant) 

 

     An SMSF wants to acquire a vacant block of land and build a house on it under an LRBA.

  • Contract 1: The bare trustee company signs a contract to buy the vacant land.

  • Contract 2: Later, the SMSF signs a separate building contract with a builder to construct a house.

     Why this is a problem:

  • Two contracts effectively mean two separate assets (vacant land + building works).

  • The LRBA rules allow borrowing to acquire a single acquirable asset only.

  • Adding a building under a second contract can be treated as a replacement which generally breaches LRBA rules and the SIS Act. 

 

✅ Correct — Single Contract (Compliant)

 

       The SMSF structures the deal so that:

  • One Contract of Sale/Exchange is signed for the whole property arrangement (land and completed house) with the bare trustee company named as purchaser.

  • The contract stipulates that the property will be delivered as a completed house-and-land package at settlement.

         Why this works:

  • There is only one contract for a single acquirable asset.

  • The bare trustee company is properly recorded as purchaser.

  • The LRBA loan covers one identifiable asset (house and land package).

3. Payments Must Come from the SMSF Account: All SMSF-related payments must be made directly from the fund’s bank account. Using a member’s personal account to pay SMSF expenses or make investments is not permitted, as it breaches the requirement to keep fund assets separate from members’ personal assets.Below is an example: 
 
  • An SMSF purchases a property. The $10,000 deposit must be paid from the SMSF’s bank account. If a trustee accidentally pays it from their personal account, which is a contravention. 
 

4. Outdated SMSF Deed: An SMSF operating under an outdated trust deed that does not include borrowing powers may not technically breach the SIS Act, but it will breach the fund’s own governing rules. This can cause significant compliance and operational issues. Below is an example: 

 

  • An SMSF trustee arranges a Limited Recourse Borrowing Arrangement (LRBA) to buy a property. However, the trust deed has not been updated since 2005 and does not authorise borrowing. Even though the SIS Act allows LRBAs, the fund is breaching its own deed by borrowing without authority.
   

Date:  16 October 2025

 

Time: 2:30 PM- 3:30 PM AEST

 

Cost:  $50

 

CPD:  1 Hour

5. Dates of execution of bare Trustdeed:  Lenders generally require a bare trust deed to be properly executed and dated before they will settle an SMSF property loan. The exact timing can vary depending on state laws, but as a rule, the deed should be dated and executed before the property purchase settles to ensure the structure is valid and acceptable to the lender.
https://stratus.campaign-image.com.au/images/27408000018747004_zc_v1_1758692482104_screenshot_2025_09_24_111112.png
   

Repercussions of an incorrectly executed Bare Trust Deed

https://stratus.campaign-image.com.au/images/27408000018747004_zc_v1_1758693718694_screenshot_2025_09_24_113143.png
   

 

  • Double stamp duty: This can arise when the property is transferred from the bare trustee company to the SMSF trustee company upon repayment of the loan. At that stage, duty is assessed again as the legal title changes hands, even though the beneficial owner remains the same. In such cases, if the original arrangement and documentation were not compliant, you may not be eligible for concessional duty and could be liable to pay full ad valorem duty on the transfer. It’s therefore crucial to ensure the structure and timing of the documentation are correct.

  • Penalties and interest may apply: If a trust deed is not properly executed, stamped, or compliant with legal requirements, regulatory authorities (such as the state revenue office or ATO) may impose financial penalties and interest for non-compliance.

  • A bare trust deed may be inadmissible in court: Courts may refuse to recognise an improperly drafted or outdated bare trust deed as valid evidence. This can create legal complications if disputes arise regarding ownership or control of the assets held in the trust.

  • Auditor qualifications and fund non-compliance: A qualified audit report can lead to the SMSF being classified as “non-complying,” which may result in significant tax penalties and the loss of concessional tax treatment.
   
   

Visit www.trustdeed.com.au for more details or call us on(02) 9684 4199
   

Follow Us On

 You are receiving this email as you signed up for our newsletters.

 Want to change how you receive these emails?

You can Unsubscribe or Update your preferences
 
click here to unsubscribe from the mailing list
Share