Who is the SMSF purchaser on a contract of sale?

This seemingly simple question is probably the most important when considering becoming a SMSF purchaser to purchase an investment property. Unfortunately this is the area that property investors seem to get wrong.

The name on the contract for the purchase of a property when a SMSF loan is used needs to be the Trustee of the Bare Trust. The Trustee should be a company, for example:

Smith Custodian Pty Ltd [A.C.N. 123 456 789]

A Corporate Trustee structure for your BARE Trust has the following advantages:

• The majority of banks and lenders who have SMSF loan products require a company as Trustee of your Bare Trust
• Property registered in the name of the company will be legally separate from those held in the personal names of the members of the SMSF
• A separate Trustee company adds another layer of legal protection
• The same company can be used as Trustee of multiple BARE Trusts

The following names should NOT be put on the contract of sale when your SMSF purchases property utilising borrowed funds:

• The name of the SMSF
• The names of the Trustee(s) of the SMSF
• The names of the members of the SMSF
• Any of the above with “and/or nominee” * (this option is o.k if you buy the property in Victoria)

* If you sign a contract of sale for a property purchase with the intention of it being held by your SMSF using borrowings, and you don’t have the correct name on the contract, you will need to go back to the vendor and arrange for an entirely NEW CONTRACT to be completed with the correct name.  This of course is not ideal, and you may lose any leverage you have gained in the negotiation of the price and terms of the original contract.