When buying an investment property for a self-managed superannuation fund (SMSF), the mortgage itself cannot legally be held in the name of the SMSF, for this reason, a bare trust
needs to set up to apply for an SMSF home loan and purchase the property, with all benefits going to the SMSF beneficiaries.
Under the Superannuation Industry (Supervision) Regulations 1993 (SIS Act), the investment property and mortgage must be held in the name of a bare trust or custodian trust. In this way, you meet the requirements of having entered into an arm’s length purchase under a Limited Recourse Borrowing Arrangement (LRBA)
You can only set up the bare trust once you’ve identified a property that you intend to purchase for your SMSF. You’ll need to provide all of the legal details of the property to your accountant first. The purchase must also pass the ‘sole purpose test’ and align with the SMSF investment strategy, as written in the trust deed.