In a recent video, Cooper Grace Ward Lawyers senior associate Keeghan Silcock said that in order for an SMSF to borrow through a limited recourse borrowing trust — more commonly known as a bare trust — it is vital that the the bare trust has been established correctly from the outset.
“This includes providing the SMSF the beneficial interest in the asset that’s being acquired by the bare trust using borrowed money,” said Ms Silcock.
“It also means allowing the SMSF the right to acquire the asset from the bare trust after one or more payments have been made.”
Ms Silcock said her firm often sees inappropriate provisions being included in the terms for the bare trust.
“Another common mistake is that an SMSF may sign a contract to acquire an asset before the bare trust has been established correctly. This can cause duty issues in certain jurisdictions,” she warned.
It is also important to understand when an SMSF can use a limited recourse borrowing trust, she said.
This will depend on the asset that the SMSF is looking to acquire using borrowed money.
“A limited recourse borrowing trust can only be used to acquire one single asset. So, if your SMSF is wanting to acquire multiple different assets, unless a certain exemption applies, then you’ll need to establish different bare trusts for each of those different assets,” she explained.
“There are also restrictions on the changes or improvements that can be made to an asset while it is owned by a bare trust. So, if the SMSF was wanting, for example, to construct a property or significantly renovate a property, then you could not use a bare trust in that circumstance.”
Miranda Brownlee
25 July 2022
smsfadviser.com
Director
BEc (Acc), MBA, CPA, FFin
David has been in the Financial Services Industry for nearly 30 years. He was one of the founding Directors of the successful Financial Planning and Stockbroking Practice, Henderson Gregory Forrest, for a decade. Prior to that, he held senior roles in companies such as ING, KPMG Accountants and AMP. David was previously Chairman of OAMPS Superannuation Trustee Board and currently serves as an independent Board Director for several companies.
David’s extensive experience in all forms of superannuation, including Self Managed Super Funds (SMSF), Defined Benefit Funds, retirement funding through Account Based Pensions, stockbroking with a focus on Direct Share Investment, Taxation/Remuneration Planning, Centrelink, Aged Care and business management, equip him to advise expertly on all aspects of Financial Advice.
Those with a particular interest in superannuation/SMSFs, direct share investment, salary packaging or applying for the Centrelink Pension will find his knowledge and ability in formulating and implementing creative, logical and simple wealth creation strategies a valuable asset.
David maintains a strong personalised client service focus, providing tailored solutions for clients.
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David Forrest is an Authorised Representative of Integrity Financial (SA) Pty Ltd ABN 16 133 921 187 — AFSL No 334846
Business Finance Manager
B Bus (Acc), CPA
Michelle’s career has spanned across the Financial Services, Retirement Living and Aged Care industries working in the private sector, not for profit and more recently with the state government for over 20 years. Her experience extends to many facets of the financial services industry, having worked in superannuation administration, technical support and financial planning practice administration.
Commencing with AMP and subsequently working in commerce and accounting roles with companies such as Brambles, Adelaide Bank Retirement Services, ECH Inc and SA Health and Wellbeing, Michelle returns to financial services after working in practice financial management at Henderson Gregory Forrest. This wide range of experience from senior accounting and management roles has provided Michelle with a strong background in business administration.
With an astute financial acumen and keen interest in business improvement strategies, Michelle ensures the smooth running of the Integrity Financial Advisory practice providing valued management support to our personalised client service focus.
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Client Service Manager
Jasmine has worked in the financial services industry for over 12 years in all areas of client administration, working with David since 2013.
Jasmine has extensive knowledge and experience in client service including implementation of advice, portfolio reporting, assisting with the establishment of Self Managed Super Funds (SMSFs), term deposit management and a long history of helping clients with their enquiries.
Jasmine’s attention to detail, yet gentle approach, means she is able to solve the trickiest of questions for our client community.
Jasmine has gained her Certificate III in Financial Services qualification.
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Senior Client Service Manager
Merrilyn has worked in the financial services industry for over 11 years in all areas of client administration, and is a new addition to our client services team, returning from Melbourne to join the team in June 2019.
Merrilyn has extensive knowledge and experience in client service including implementation of advice, managed fund administration, assisting with the establishment of Self Managed Super Funds (SMSFs) and process improvement for the previous practices she has worked with. Merrilyn’s experience with direct shares constitutes the other part of our administrative support for direct equity investments.
Merrilyn’s warm and caring nature continues to endear her to our clients and she has already established herself as a valued member of our team.
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