SMSF Setup for Property: Fund, Corporate Trustee, Bare Trust and LRBA

Buying property through a self-managed super fund is not a single transaction: it is a structure, built in a specific order, before any contract of sale is signed. Get the sequence wrong, corporate trustee established after the bare trust, or the bare trust deed drafted after settlement, and the fix can cost far more than doing it properly the first time. This article walks through that structure: establishing the fund, the corporate trustee, the bare trust a borrowing arrangement requires, and the compliance that follows once the property is held.

One premise needs correcting up front. Older guidance on SMSF property, including guidance written before August 2026, often assumes a fund can borrow to buy a residential property in the same way it borrows for a commercial one. That is no longer the case. From 10 August 2026, under the Treasury Laws Amendment (Tax Reform No. 1) Act 2026 (Royal Assent 26 June 2026), an SMSF can no longer enter a new limited recourse borrowing arrangement (LRBA) to acquire residential property. What follows describes the setup mechanics as they apply today: to a fund borrowing for business real property, or buying residential property outright with cash. For the reform itself and who it affects, see our article on the impact of the SMSF borrowing ban.

Establishing the fund and a corporate trustee

Every SMSF starts with a trust deed, the document setting out how the fund is to be run, and a trustee structure. Most property-holding funds use a corporate trustee rather than individual trustees: every member becomes a director of that company, each director needs an ASIC director ID, and the structure survives a member's death or departure without the fund needing to be restructured. Once the deed is signed and the trustee appointed, each trustee or director signs a trustee declaration, a prescribed form under the Superannuation Industry (Supervision) Regulations 1994. The fund then needs an initial contribution to formally hold assets, a TFN and ABN, and registration with the ATO as a regulated SMSF before it can accept rollovers or start investing.

The bare trust: why borrowing needs a second structure

If the fund is going to borrow to acquire the property, a second, separate trust is required: a holding trust, commonly called a bare trust. Under the LRBA rules, the asset being borrowed against is held by a bare trustee, not directly by the SMSF trustee, with the SMSF holding a beneficial interest and the right to acquire legal title once the loan is repaid. The ATO is explicit that the bare trustee cannot be the same individual or company acting as trustee of the SMSF itself, so a separate entity, typically another corporate trustee, has to be established and its deed prepared before the property contract is exchanged. Each bare trust can hold only one acquirable asset; a fund buying two properties under separate loans needs two bare trusts.

How the borrowing arrangement itself is structured

With the fund, its corporate trustee and the bare trust in place, the LRBA can be entered into: the SMSF trustee borrows from a lender, the loan funds the bare trust's acquisition of the single asset, and the lender's recourse on default is limited to that asset, not the fund's other holdings. Since 10 August 2026 that structure can only be used for a new acquisition of business real property, land and buildings used wholly and exclusively in a business. LRBAs entered into before that date, including for residential property, continue on their existing terms and can generally be refinanced on substantially similar terms without losing that protection; changing the security or drawing additional funds can be treated as a new arrangement and should be checked before it happens. A fund with sufficient balance can still buy residential property outright, without borrowing, at any time.

Compliance once the property is held

The structure does not end at settlement. Every investment decision, including the property purchase itself, must satisfy the sole purpose test: the fund exists solely to provide retirement benefits, not a present-day benefit to a trustee or related party. The property's rent and expenses must run through the fund's own bank account, the asset needs to be valued regularly for the fund's financial statements, and an independent, ASIC-registered SMSF auditor must complete both a financial and compliance audit each year before the annual return is lodged with the ATO.

Because each of these steps, the deed, the trustee, the bare trust and the borrowing arrangement, has to be sequenced correctly before a contract is signed, most trustees engage an SMSF specialist before making an offer, not after. At Finance & Tax Consultants, our SMSF team sets up funds, corporate trustees and bare trusts for property from the outset, and manages the annual compliance that follows.

Disclaimer: This article contains general information only and does not constitute financial, legal or tax advice. It has been prepared without regard to your objectives, financial situation or needs. Tax and superannuation laws change frequently, and the information in this article may not reflect the current law or may become inaccurate over time. Before acting on anything in this article, you should consider its appropriateness to your circumstances and seek advice from a registered tax agent or qualified adviser.