SMSF trustees using limited recourse borrowing arrangements (LRBA) should avoid trying to cut corners in setting up a trust for the loan, with an SMSF structure expert stating they should set up a dedicated bare trust for each gearing measure.

Acis SMSF services director Peter Johnson said section 67 of the Superannuation Industry (Supervision) Act requires that an asset purchased via an LRBA be held on trust so the SMSF can acquire a beneficial interest in that asset, but trustees and accountants are still trying to sidestep this rule.

“Something you can’t do is hold an asset on trust for yourself,” Johnson told attendees of a practitioner briefing today.

“Within the last week, I had an accountant ask me: ‘Can we have the same trustee as the trustee of the bare trust as we have for the trustee of the SMSF because you can have the trustee of a family trust be a beneficiary of the family trust?’

“Well, if you do have that arrangement, you’re the only beneficiary and you can’t hold an asset on trust for yourself, so the only entity that legally can’t be the trustee of the bare trust is the SMSF trustee.”

He said given this, the SMSF members in their own capacity can be the trustees of the bare trust as there was no restriction preventing that under the law, but he questioned this is a prudent move.

“There is no such thing as a debt of a trust. So if somebody electrocutes themselves, for example, on the property [under the LRBA], that’s not a debt of the super fund. It’s not a debt of the bare trust. It’s a debt of the bare trustee. So they probably shouldn’t be in that role,” he noted.

“The other answer to that question is, what does a bank want? You can put as many people in as trustees as you like, but the bank is not going to accept that and will want a cleanskin bare trustee company or it won’t lend you the money.

“I have learned over the 11,000 bare trusts that I’ve done, that the golden rule of finance is that the man with the gold makes all the rules.”

July 28, 2025
Jason Spits
smsmagazine.com.au

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David Forrest

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.

Qualifications:

Bachelor of Economics with Accounting Major (BEc (Acc))
Master of Business Administration (MBA)
Certified Practising Accountant (CPA Australia)
Graduate Diploma in Applied Finance and Investment (FFin)

Memberships:

Member of the professional association of Certified Practising Accountants (CPA Australia)

Contact:

David Forrest is an Authorised Representative of Integrity Financial (SA) Pty Ltd ABN 16 133 921 187 — AFSL No 334846

Michelle Forrest

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.

Qualifications: