Stamp Duty and Other Considerations

Limited Recourse Borrowing Arrangement (LRBA)

Stamp Duty & Other Considerations

SMSF Stamp DutyDetails matter.  In relation to the application of ad valorem stamp duty (based on the value of the property) on the purchase of a property by a Self-Managed Superannuation Fund (SMSF) which is subject to a LRBA there are three taxing points being:

  1. Purchase of the property
  2. On establishment of the bare trust deed (holding or custodian trust deed)
  3. Transfer of the property from the bare trustee back to the SMSF trustee

Each State varies as to its requirements concerning the dating of bare trusts relative to contracts and the name of the Purchaser on a contract for sale of land. Where these requirements are not met, the limited recourse borrowing arrangement may be subject to double, or even triple, stamp duty or ineligibility to access concessional or reduced duty.

The timing and way in which the following are undertaken are vital in this process.

  • Timing of the purchase contract vs the signing of the bare trust deed
  • Purchaser named on the contract
  • The purchase money, including the deposit, must be paid by the SMSF
  • Relevant records should be retained as audit evidence

n.b there is no superannuation legislation which requires the transfer of the property from the custodian (bare trustee) to the SMSF trustee when the loan is fully repaid.  However, the property remains subject to the restrictions under the LRBA whilst it continues to be held by the custodian.  This would be problematic for example if vacant land was the asset subject to the LRBA and the SMSF trustee wanted to develop it after the loan was repaid.  In this situation the title must be transferred to the SMSF trustee or the LRBA rules would be breached with serious consequences.

Off-The-Plan Property Purchases

Off-The-Plan property purchase can be funded by a SMSF using a LRBA. The following highlight some issues which require careful consideration:

  • The property must be a single acquirable property – ensure furniture package does not form part of the contract for the purchase of the property which is subject to the loan.
  • The car park may be a separate single acquirable asset if it can be traded separately. If so it may need to be under a separate LRBA or purchased from existing SMSF cash.
  • The deposit should be paid directly from the SMSF bank account or can be a separate LRBA.
  • Consider the purchaser on the contract and when the bare trust should be established to avoid double stamp duty issues. The contract is signed well before the property identifier is known which is typically one to two years when the development is completed.

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If you’re interested in learning more about LRBA or Stamp Duty please reach out for a confidential quote. Simply submit your details and one of our friendly team will be in touch as soon as possible.

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Name(Required)
StateStamping RequirementsDutyLink to State/territoryPurchase contract exchange prior to bare trust deed executionExecution of bare trust deedPurchaser named on the Contract
NSWRequires to be stamped within 3 months of execution of the bare trust$750Duties Act 1997 No 123 – NSW legislation
Refer to S 8 and S 62B
Superannuation trust: section 62B | Revenue NSW
YesAfter Exchange of contract – have up to 3 months to get it stamped (can be executed post settlement)[Bare Trustee Name] Pty Ltd ACN XXX XXX XXX– the bare trust can be named but not required
VICRequires to be stamped within 30 days of execution of the bare trust- A copy of the bare trust deed and declaring the deed was executed in VictoriaNilDUTIES ACT 2000 (austlii.edu.au)
Refer to s7(1)(b)(i) and s34(1)(a)(i)
Limited recourse borrowing arrangements (custodian trusts and holding trusts) | State Revenue Office (sro.vic.gov.au)
The purchase contract or the bare trust can be executed in any orderAfter Exchange of contract and before settlement but within 30 days of execution[Bare Trustee Name] Pty Ltd ACN XXX XXX XXX– the bare trust can be named but not required
QLDNot required to be stamped- Self assessment – onlineNilDUTIES ACT 2001 – As at 1 July 2023 – Act 71 of 2001 (austlii.edu.au)
Refer to ss 9 and 66
Transfer by direction to superannuation custodian exemption (s.130A) toolkit – Queensland Revenue Office (qro.qld.gov.au)
NoBefore exchange of the purchase contract[Bare Trustee Name] Pty Ltd ACN XXX XXX XXX as trustee [Name of Bare Trust]
WARequired to be stamped – Self assessment$20Duties Act 2008 – [03-i0-03].pdf (legislation.wa.gov.au)
Refer to S11 and S117 and S118 of the Duties Act & Schedule 2 Div 3 (rates)
Nominal transfer duty (www.wa.gov.au)
The purchase contract or the bare trust can be executed in any order. However, as the name of the trust is included in the title it should be before or on the date of the contractBefore or on the Exchange of contract – have up to two months to stamp[Bare Trustee Name] Pty Ltd ACN XXX XXX XXX as trustee [Name of Bare Trust]
SANot required to be stamped – Self assessmentNilStamp Duties Act 1923 (legislation.sa.gov.au)
Refer to s71(3) and s71(7a)
SDDGAC.pdf (revenuesa.sa.gov.au)
Refer to Declaration of Trust over land
YesAfter Exchange of contract and before settlement[Bare Trustee Name] Pty Ltd ACN XXX XXX XXX– the bare trust can be named but not required
TASRequires to be stamped within 90 days of the execution of the bare trust$50act-2001-015 (legislation.tas.gov.au)
Refer to S16(4) and 39(1)(a)
Limited recourse borrowing arrangements | State Revenue Office Tasmania (sro.tas.gov.au)
YesAfter Exchange of contractBare Trustee Name] Pty Ltd ACN XXX XXX XXX
ACTNot required to be stampedNilDUTIES ACT 1999 (austlii.edu.au)
Refer to S7 and 56
Property vested in apparent purchaser | ACT Revenue Office – Website
YesAfter Exchange of contract[Bare Trustee Name] Pty Ltd ACN XXX XXX XXX– the bare trust can be named but not required
NTRequires to be stamped within 60 days of execution$20STAMP DUTY ACT 1978 (austlii.edu.au)
Refer to s56BA and item 1, Sch 1
Examples of duty and rates | NT.GOV.AU
NoBefore exchange of the purchase contract[Bare Trustee Name] Pty Ltd ACN XXX XXX XXX as trustee [Name of Bare Trust] as bare trustee for [SMSF Trustee] as trustee for [Name of SMSF] ABN XXX XXX XXX

Warningcheck with a conveyancer to ensure the title is correctly identified in the contract in accordance with local state laws.

Use of “Nominee” on the purchase contract -Although it may still be legally binding in some states (Victoria for example) where “or nominee” is used on a contract to purchase property, it is not in others (such as Queensland).

 Exchange of contract – It is when the contract becomes legally binding.  The purchase contract is signed and exchanged between the buyer and the seller committing both parties to the terms of the contract.

Bare Trustee Company – ensure this is incorporated prior to entering into any contract of purchase and executing the bare trust deed.

The Bare Trustee can be a related company or other related party including a member.  It is not required to be a company but, generally, it is best practice to be established as a stand alone corporate trustee to ensure clear title compared to other SMSF assets and personal assets of the members as well as better legal protection. Some lending institutions may require a corporate trustee.

Do you want to learn more about LRBA or Stamp Duty?

Give us a call on 1300 392 544 or get in touch online.

Contact Us

If you’re interested in learning more about LRBA or Stamp Duty please reach out for a confidential quote. Simply submit your details and one of our friendly team will be in touch as soon as possible.

Contact Us

Name(Required)

Do you want to learn more about LRBA or Stamp Duty?

Give us a call on 1300 392 544 or fill in the form above.