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Why do I need a Bare Trust in my SMSF?

A Bare Trust is a crucial element of many SMSF property investments, primarily because it ensures compliance with superannuation laws, such as the “sole purpose test.” This legal requirement mandates that superannuation funds exist primarily to provide retirement benefits to members. By using a Bare Trust, you separate the legal ownership of the property from the SMSF trustee, reducing compliance risks and protecting assets. The Bare Trustee holds legal ownership but has limited powers and must follow the SMSF trustee’s instructions, minimizing their involvement and liability.