When it comes to trust property in an SMSF, sometimes a bank or finance company may insist on certain arrangements that may cause issues further down the track. People assume that as a bank or financial institution is requesting it, it must be a legal requirement, but this isn’t always the case.
We have come across several instances of this with regard to one particular issue regarding bare trusts, and thought we would share it with you.
In order to purchase a strata title unit, the trustee of a superannuation fund will often enter into a limited recourse borrowing arrangement. The property will be purchased and transferred into the name of the trustee of the bare trust.
In a mistaken understanding of the meaning of ‘single acquirable asset’ in s67A of the Superannuation Industry (Supervision) Act 1993, some banks or finance companies have insisted upon:
- the residential unit being transferred into the name of the trustee of the bare trust, and
- the accessory unit being transferred into the name of the trustee of the superannuation fund.
However, Land Victoria will not register such transfers because the residential unit and the accessory unit must have the same owner.
We have been able to successfully resist these attempts by banks/finance companies, but we know of others who haven’t. Please give us a call on 03 9899 6006 if you need any assistance with correctly setting up your bare trust and/or limited recourse borrowing arrangement to ensure you don’t encounter problems.