What is a Bare Trust in an SMSF Borrowing Arrangement?

Quick Answer

A bare trust in an SMSF borrowing arrangement is a trust established to hold the title of a single acquirable asset on behalf of the SMSF trustee. Under the Limited Recourse Borrowing Arrangement (LRBA) rules, the SMSF can borrow to purchase an asset, which is held in the bare trust until the loan is repaid. This structure ensures compliance with superannuation laws while allowing the SMSF to invest in property.