Does a bare trust need to be stamped?
Whether duty is payable and any requirements of stamping a Bare Trust or Asset Acquisition Trust (“AAT”) is dependent on the State.
NSW – Duty is payable and you will need to lodge the Declaration of Trust through a Revenue NSW (OSR) agent on Duties Online or through the OSR public lodgement system. As an agent of the Revenue NSW we can do this lodgement for you for a fee, starting from $495 (GST inc), plus OSR Duty payable of $500. We require the following documentation:
- Executed Bare Trust Deed or AAT
- Copy of any related deeds of amendment or variations
- Signed full copy of the related Self Managed Super Fund trust deed
- Copy of the Contract of Sale that has been stamped with ad valorem duty, if not stamped evidence of stamp duty paid on the contract of sale
- Bank statements with full account holders’ names and copy of loan agreements
- Purchaser declaration form (ODA 076 I or ODA 076 NI)
VIC – No duty is payable on an AAT in Victoria however it is a requirement that the Deed is lodged with SRO. To do this you will need to lodge the Declaration of Trust through an SRO agent on Duties Online or through the SRO’s public lodgement system. As an agent of the SRO we are able to do this lodgement for you for a small fee of $88 incl gst. All we need is:
- A scanned copy of the executed Deed.
- A signed document stating that the Deed was executed in Victoria (template enclosed).
NT – To have your AAT stamped in NT you will need to drop the executed Deed along with the contract it relates to the Territory Revenue Office or post it in to them (we recommend using trackable post). Duty is payable at $5.
QLD, SA, ACT, TAS & WA – Stamp Duty is not payable on the declaration of Trust.
Should I use a corporate trustee for my Bare Trust?
A corporate trustee has several advantages over an individual trustee:
Immortality
A corporate trustee, being a separate legal entity, can exist indefinitely, whereas individual trustees will eventually die, may become incapacitated, or may want out for another reason.
Legal ownership of the trust assets
Assets in a trust are held in the name of the Trustee on behalf of the trust. If individuals act as the trustee of your trust and you later want to change the trustee, you will have to change the legal owner of your trust’s assets. Conversely, you can simply change the shareholders and directors of a corporate trustee which will not change the legal owner of the trust’s assets.
Asset protection & limited liability
Individual trustees can be personally liable for any loans taken out or liabilities that the trust may incur. If a corporate trustee is used, liability will generally be limited to the assets of the trustee company itself.
Does a bare trust need to register for an ABN, TFN & GST?
The trustee of a bare trust does not need to register for an ABN or TFN, nor do they need to register for GST as the Superannuation fund holds the beneficial interest in the asset, receiving all of the income and being responsible for all of the expenses relating to the asset.
Can a bare trust be used to acquire multiple assets?
A bare trust can be used for the acquisition of a “single acquirable asset” meaning it can generally only be used to purchase one piece of property. It may however be possible to acquire multiple property titles providing it is reasonable to conclude that what is being acquired is distinctly identifiable as a single asset.
A bare trust may also be used to acquire a ‘collection of assets’ so long as the assets in the collection are identical and have the same market value (e.g. shares).
A bare trust can also be used to acquire a ‘replacement asset’ to replace an original asset in certain circumstances with the most common being where shares in a company, or units in a unit trust, are being replaced by shares or units as a result of a takeover, merger, demerger or restructure.
What type of asset can be purchased using a bare trust?
A Bare Trust used for Limited Recourse Borrowing Arrangments (LRBAs) can be used to purchase an asset as defined by sections 67A & 67B of the SIS Act 1993.
Bare Trusts not related to SMSF borrowing can be used to purchase any asset, other than money.
Who are the parties involved in a bare trust?
This depends on whether you are ordering a Bare Trust used for a Limited Recourse Borrowing Arrangement (LRBA) or a Bare Trust not related to an SMSF.
A Bare Trust used for LRBA involves four main parties; the SMSF trustee, the bare trust trustee, the vendor of an acquirable asset and the lender. As Superannuation law does not allow an SMSF to borrow money, an LRBA is used where the trustee of the bare trust borrows money from a lender to purchase an asset. Under this arrangement, the asset is held in trust with the trustee of the SMSF holding the beneficial interest. If the event of a default on the loan, the lenders rights are limited to the asset held in the bare trust meaning there is no recourse to the other assets held in the SMSF.
If the Bare Trust is not used for LRBA, the parties involved are the Trustee and the specified Beneficiaries.
What is a bare trust?
A Bare Trust is generally the simplest form of trust. This arrangement involves the trustee holding a particular item of property for one or more specifically identified beneficiaries. Under a Bare Trust, the trustee has no duties to perform beyond handing over the property to the beneficiaries when instructed to do so.
A Bare Trust used for Limited Recourse Borrowing Arrangements (LRBA) was introduced to satisfy the requirements of sections 67 A&B of the Superannuation Industry Supervision Act 1993. A Bare Trust used for LRBA is established to allow an SMSF to borrow money for an asset. A lending entity is prohibited from having recourse to any asset of the Superannuation Fund other than the asset held in trust by the Trustee of the Bare Trust. Bare Trusts include a number of provisions which address the requirements of the Act - that the Trustee:
- is only permitted to hold one asset on trust (under each Trust arrangement),
- must account to the Trustee of the Superannuation Fund for any income received from the Trust asset; and
- must in the Deed be required to transfer the asset to the Trustee of the Superannuation Fund if requested once the loan has been repaid.
Is it always called a bare trust?
Bare trusts can be known by several other names. A few of these include:
- Asset Acquisition Trust (or AAT)
- Custodian Trust
- Debt Instalment Trust
Is a Bare Trust used for Limited Recourse Borrowing Arrangements able to have the same Trustee as the related Superannuation Trust?
If the trustee is a corporate trustee then the answer is no. The Superannuation Industry Supervision Act is specific, under section 67 A & B that the Trustee must be a different legal entity. The Trustee can be an individual, a group of individuals or a Company. Directors of the Corporate Trustee of the Bare Trust can be the same as the members of the Fund.
It is in our experience that most banks will not lend to a Bare Trust with individual Trustees.
