September 17, 2025

Purpose of the Bare Trust The Bare Trust is set up when an SMSF (Self-Managed Super Fund) borrows to buy property under a Limited Recourse Borrowing Arrangement (LRBA). A separate trustee company (the ‘bare trustee’ or ‘custodian’) legally holds the property on trust for the SMSF. The SMSF is the beneficial owner of the property, even though the legal title is in the name of the bare trustee. Role of the Bare Trust Company The Bare Trust company is usually a special-purpose company with no other role than to hold the property title. It does not trade or earn income itself — all income and expenses flow directly to the SMSF. The directors and shareholders of this company are typically the same individuals who are members/trustees of the SMSF, but that is by choice, not a legal requirement. Shareholders of the Bare Trustee Company The shareholders of the bare trustee company are not automatically the beneficiaries of the trust. Beneficiaries of the bare trust are determined by the trust deed: in this case, the SMSF itself is the sole beneficiary. Shareholders of the company just own the company (which acts as trustee). Their rights relate to the company, not directly to the trust property. Beneficiary in Practice The SMSF is the only beneficiary of the bare trust. The SMSF members (individuals) are beneficiaries of the SMSF, not of the bare trust directly. Therefore, being a shareholder in the bare trustee company does not give you beneficial rights in the property. Those rights flow only through your member interest in the SMSF. The shareholders of the bare trustee company are not beneficiaries of the bare trust. The SMSF itself is the sole beneficiary, and SMSF members benefit through their SMSF membership, not through shareholding in the bare trustee company.