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Getting it right on LRBAs and property

Updated: Dec 6, 2023

Acquiring property in a Self-Managed Superannuation Fund (SMSF) through Limited Recourse Borrowing Arrangements (LRBA) requires adherence to a set of formal procedures to avoid potential adverse stamp duty costs. In this article I’ll outline the important aspects essential for the successful execution of these transactions.

Limited recourse borrowing arrangements permit superannuation funds to borrow funds under specific and stringent conditions. While LRBAs may not rival nuclear physics in terms of complexity, their intricacies should not be overlooked.

It is a common practice for advisers to obtain economical bare trust deeds from document providers, presuming that this suffices to complete the task. However, this assumption can be perilous. The entire transaction, when viewed holistically, presents numerous pitfalls for those unfamiliar or inexperienced, pitfalls that could result in substantial financial implications for the fund.

Failing to understand the fundamentals can jeopardize the compliance requirements of the transaction, resulting in unnecessary and higher stamp duty payments. Here are the crucial elements to consider when establishing a compliant Limited Recourse Borrowing Arrangement (LRBA) for real estate acquisition:

1. Timing of the Contract in Relation to the Holding Trust Deed: Understand the crucial alignment between the contract timing and the holding trust deed to ensure compliance.

2. Significance of the Purchaser's Name on a Contract: Recognize the importance of accurately specifying the purchaser's name on the contract for a seamless and compliant LRBA.

3. Correct Payment of the Deposit: Learn the correct procedures for deposit payment to adhere to compliance standards.

4. Inclusions Allowed on the Contract: Familiarize yourself with the permissible inclusions on the contract to avoid potential compliance issues.

5. Considerations When Purchasing Off the Plan: Address the specific challenges and considerations associated with purchasing property off the plan within the LRBA framework.

Limited Recourse Borrowing Refresher: For those not yet familiar in this area, an LRBA for property involves:

• The SMSF trustee borrowing from a lender to acquire property (with lender rights limited to the purchased property in case of default).

• The SMSF trustee establishing an agreement with a holding trustee to hold the property for the super fund.

• The holding trustee engaging in a contract and purchasing the property from the vendor using funds from the SMSF trustee.

Figure 1: How an LRBA for a real estate purchase works

Table 1


Holding Trustee

Ad valorem Duty

Also Known as:

Also Known as:

What is it?

Super gearing


Full Stamp duty (No Concessions)

​Debt Installment Warrants

bare trustee

calculated base on property vale

Bare Trust

Property Trustee

in NSW on $500,000 property purchase price, ad valorem duty is approx $18,000

Secuity Trust

Security Truste


While the terminology employed may differ, the fundamental regulatory principles governing the transaction remain steadfast.

Timing of Contract

In the domain of Limited Recourse Borrowing Arrangements (LRBAs), a crucial consideration is the chronological sequence in which events unfold. The pivotal question revolves around whether the contract precedes the holding trust deed or vice versa. This distinction bears significant consequences, primarily revolving around a critical factor: stamp duty.

A misstep in this sequence could result in unintentionally incurring ad valorem duty threefold, instead of the intended singular occurrence. To illustrate, in New South Wales, on a property with a purchase price of $500,000, the ad valorem duty amounts to $18,000. An error in judgment may lead to paying ad valorem duty on the contract of sale, followed by additional charges on the holding trust deed, and ultimately, on the subsequent transfer back to the SMSF trustee.

The initial inquiry should direct attention to the property's location, as each state and territory operates under distinct stamp duty laws. Consequently, the prescribed order for signing documents varies depending on the jurisdiction of the property.

For properties situated in NSW, Tasmania, or the Australian Capital Territory, the contract must be executed and dated before the holding trust deed. Any deviation from this sequence may trigger ad valorem duty on both the holding trust deed, classified as a 'declaration of trust,' and the contract.

Conversely, in South Australia, Queensland, or the Northern Territory, the holding trust deed must precede the contract. In Western Australia or Victoria, the order of signing is flexible, permitting either the contract or holding trust deed to be signed first. Nevertheless, the conventional practice often involves initiating the contract signing, streamlining document preparation as the purchase progresses to the exchange stage.

Purchaser on Contract

Distinct states and territories impose specific requirements regarding the identification of the purchaser on a contract, adding a layer of complexity to Limited Recourse Borrowing Arrangements (LRBAs).

In NSW, Victoria, Tasmania, the ACT, South Australia, and Queensland, it is crucial that the purchaser is solely the name of the holding trustee. Any inclusion of references such as "as trustee for the bare trust" or "as trustee for the SMSF" could lead to unfavorable stamp duty implications.

Opting for a corporate holding trustee is recommended, often constituting the initial step in any LRBA, regardless of the property's location. Establishing a company as the holding trustee proves advantageous as companies exhibit enduring stability—free from mortality, capacity loss, or divorce. This choice simplifies any necessary changes by allowing for a straightforward alteration of directors rather than navigating changes to individual names on a property title. Moreover, many lenders prefer corporate holding trustees.

While some members may consider using their own names with 'and/or nominee,' caution is advised. In certain states, such as NSW, this approach may trigger ad valorem duty, especially if the holding trustee is subsequently nominated by the individuals. Currently, Victoria is the sole state permitting the use of 'and/or nominee,' but local conveyancer advice is crucial for confirmation.

The specified name for the purchaser on the contract for Northern Territory properties follows a precise format: "Holding Trustee Pty Ltd ACN as trustee for Name of Holding Trust as bare trustee for Fund Trustee Pty Ltd ACN as trustee for Name of Fund ABN."

In Western Australia, the term 'for' must be inserted between the holding trustee and SMSF trustee names, forming "Holding Trustee Pty Ltd ACN for Super Fund Trustee Pty Ltd ACN."

Paying the Deposit

The payment of the deposit holds significance during two critical events: the stamping of the holding trust deed (except for properties in Queensland) and the property's transfer back to the super fund after loan repayment. Demonstrating that all purchase funds originated from the SMSF trustee's bank account is essential for concessional stamp duty eligibility.

Considering alternative methods for deposit payment, such as deposit bonds or bank guarantees, requires meticulous scrutiny of the wording and relationships established. Seeking legal advice ensures compliance and mitigates risks associated with non-compliant arrangements.

Inclusions on the Contract

Contracts enumerate items to pass with the sale, referred to as inclusions. These include fixtures and chattels. Fixtures, integral to the land, accompany the real estate purchase and can be financed through borrowed funds. Chattels, separate from the land, necessitate a distinct loan for each.

Discerning between fixtures and chattels involves considering permanence, ease of removal, and value relative to the property. Clear definitions are vital, with guidance from conveyancers recommended due to potential state-to-state variations.

Purchasing Property Off the Plan

Off-the-plan purchases involve using draft strata plans for the sale of units not yet constructed. The challenge in LRBA transactions is the absence of final title particulars at the contract signing.

For states like NSW, Tasmania, the ACT, WA, and Victoria, where the contract is signed before holding trust deed, draft title particulars are used initially but must be updated in the holding trust deed before signing, aligning with final details just before settlement.

In SA, Queensland, and the Northern Territory, where the holding trust deed is signed before the contract, attaching a copy of the contract at the time of signing ensures clarity regarding the purchased land.

The accuracy of the property description in the holding trust deed is crucial, affecting the concessional stamp duty on the eventual transfer back to the fund. Ensuring clarity in property identification is imperative for avoiding potential issues and securing the stamp duty concession.


Seeking comprehensive advice before embarking on these transactions is critical. Diligent initial steps can safeguard against adverse stamp duty implications and ensure a robust foundation for the transaction. Taking precautions at the outset helps prevent complications, reducing stress for all parties involved and maintaining the integrity of the transaction.

The advice provided ensures avoidance of common pitfalls, such as signing contracts and holding trust deeds in the wrong order or making errors in the purchaser's name on the contract or deposit payment methods. Mitigating these transactional risks contributes to a smoother process and contentment for all parties, excluding the Duties Office.

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