Using a Self-Managed Superannuation Fund (SMSF) to invest in real property can be a powerful wealth-building strategy for Australians. But when borrowed funds are involved, the legal and compliance risks increase significantly. One of the most common and costly errors occurs right at the beginning — when the wrong purchaser is named on the contract.
At W & G Lawyers, we regularly assist clients in navigating the legal complexity of SMSF property purchases involving finance, ensuring the right structure is in place from day one.
The Role of the Custodian Trustee (Bare Trustee)
When an SMSF acquires property through a Limited Recourse Borrowing Arrangement (LRBA), the legal title must not be held directly in the name of the SMSF while the loan is active. Instead:
- A custodian trustee (or holding trustee) holds legal title on behalf of the SMSF.
- The SMSF members retain the beneficial ownership and are entitled to any rental income or capital gain.
- Once the loan is fully repaid, legal title is transferred from the custodian to the SMSF trustee.
This structure must be established before the contract is signed to ensure legal and tax compliance.
Who Should Be Named as the Purchaser on the Contract?
This is where many SMSF buyers go wrong.
If the SMSF trustee is mistakenly named as the purchaser — instead of the custodian trustee — it may result in:
- Breach of the Superannuation Industry (Supervision) Act 1993 (Cth)
- Ineligibility for important stamp duty exemptions
- Regulatory or compliance issues that are difficult to rectify after the fact
The correct entity to name on the contract is the trustee of the bare trust, which should be in place before the contract is executed.
If the custodian trustee is a company, the company’s full legal name should be listed as the purchaser.
Stamp Duty Exemptions in Queensland
Queensland offers valuable stamp duty relief under section 130B of the Duties Act 2001 (Qld) for SMSF property purchases involving LRBAs. This applies in two scenarios:
- When the property is transferred from the SMSF trustee to the custodian (on loan setup), or
- When it is transferred from the custodian to the SMSF trustee (after loan repayment)
However, the exemption may not apply if:
- The asset stops being part of the SMSF;
- There is a change in the beneficial interests among SMSF members; or
- The arrangement does not comply strictly with section 67A of the SIS Act
A simple mistake in timing or structure can result in unnecessary stamp duty liability — which can be significant.
Key Takeaways
- Always establish the bare trust before signing the contract.
- Ensure the custodian trustee is correctly named as purchaser.
- Work with a solicitor to review all LRBA documents and ensure compliance with both superannuation and duty law.
- Legal missteps — even minor — can result in breach of law and tax penalties.
Further Reading & Official Resources
For more information about SMSF compliance, borrowing arrangements, and stamp duty exemptions, you may refer to the following official resources:
How W & G Lawyers Can Help
We assist SMSF trustees with all legal aspects of acquiring real property using finance, including:
- Establishing compliant LRBA structures and bare trusts
- Contract and purchaser name review before signing
- Stamp duty and tax advice
- Liaison with lenders and accountants
- Legal title transfer post-loan repayment
- Ongoing SMSF compliance and asset protection
📧 Contact us at info@wglawyers.com.au
📞 Or call: 0433 071 350
Our experienced legal team can help you structure your SMSF property investment the right way — from the start.
Disclaimer
The information contained in this article is provided for general informational purposes only and does not constitute legal advice, nor is it intended to replace legal advice specific to your circumstances.
While every effort has been made to ensure the accuracy of the content at the time of publication, laws and procedures may change.
You should not act or rely on any information in this article without first seeking legal advice from a qualified solicitor.
If you require assistance with SMSF property purchases, LRBA structuring, or compliance issues, please contact W & G Lawyers for tailored legal support.