SMSF Tips - How to Avoid Double Duty? (Borrowing in Victoria)

Tax Law: 23 February 2026

Author: Marco Saccotelli - Our People

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Borrowing through a self‑managed super fund (SMSF) can be a smart way to acquire property, but navigating Limited Recourse Borrowing Arrangements (LRBAs) in Victoria comes with unique duty risks. Understanding how double duty can arise, and how to avoid it, is essential for trustees, advisers and accountants involved in supporting clients with SMSF property purchases.

What is a Limited Recourse Borrowing Arrangement (LRBA)?

Since 2007, ss.67A and 67B of the Superannuation Industry (Supervision) Act 1993 (Cth) (SISA) have allowed self-managed super funds (SMSFs) to take on debt to acquire an asset. The conditions require that the asset financed is registered in the name of a custodian or bare trustee of a bare trust holding the asset in favour of the SMSF as the beneficial owner which has provided all purchase monies and acquisition costs. The lender’s loan must be a limited recourse loan meaning that the only remedy/security for a default action against the SMSF, is the property held by the bare trustee which will be subject to a mortgage in favour of the lender. The bare trust must only hold a ‘single acquirable asset’. These arrangements are known as ‘limited recourse borrowing arrangements’ or LRBAs.

The most common asset financed by SMSFs is real estate. The Federal tax implications of LRBAs are now generally well understood by advisers, for example:

1. the bare trust is a transparent trust and so the acquisition or disposal, as well as any income earned and deductions relating to the asset, are to be treated as if the custodian did not exist and all acts/transactions are taken to be acts/transactions of the SMSF (see section 235-80(2) of the Income Tax Assessment Act 1997 (Cth), which makes it clear that an instalment trust in this case is a ‘look through’ trust or transparent trust); and
2. The ATO’s various rulings on the question of what is a ‘single acquirable asset’ clarify the common real estate acquisition scenarios - for example, a strata title to an apartment with a linked accessory title for a carpark is treated as a single acquirable asset provided the titles can only be bought and sold together. A situation where carparks are common property in a subdivision and the acquisition of an apartment allows use of a carpark for a nominal licence fee of $1 per annum would also satisfy the single acquirable asset rule.

Why Double Duty is a risk in Victoria 

Each State and Territory has its own rules as to what transactions are ‘dutiable transactions’ and what exemptions apply to a transfer of land or a declaration of trust over identified property.

In Victoria, we have noticed that some financial planners, accountants and specialist SMSF advisers are unsure of best practice to avoid potential double duty on both the initial transfer of purchased land to the custodian’s name and any duty that might be payable on a declaration of trust over real property. The confusion arises because there are multiple exemptions that might apply but with each having different evidentiary requirements and steps that must be taken.

Best Practice to Avoid Double Duty for SMSF Property Purchases

The simplest and ‘best practice’ strategy under the Duties Act 2000 (Vic) is as follows:

1. A corporate custodian/bare trustee signs a contract of sale – if the bare trust has been executed already and identifies the property proposed to be purchased and held on trust his is acceptable and the contract can specify that the purchaser is the custodian as trustee for the name of the bare trust;
2. Alternatively, the custodian can sign a contract of sale and then sign the bare trust deed later provided that the trust deed is signed before completion – in this case the custodian will use its company name and A.C.N on the contract of sale. The bare trust deed must be signed and lodged with the SRO for assessment as exempt (see para (d) below) within 60 days;
3. It is vital that the trust deed makes it clear that the SMSF is providing all funds required to make the acquisition and specifically, that the deposit is paid to the custodian from the SMSF’s bank account and that the SMSF is the borrower and therefore will provide the loan funds and sufficient money required to meet all conveyancing, duty and disbursement costs;
4. A declaration of trust over identified property is prima facie liable to ad valorem duty in Victoria (see s.7(1)(b)(i)) but will be exempt from duty under s.34(1)(a)(i) when it can be proven on lodgment of the trust deed that the custodian is merely the ‘apparent purchaser’ but the real purchaser is the SMSF who has provided all funds required to acquire the property;
5. Then the custodian will pay the normal ad valorem duty assessed on the transfer of the land under s.7(1)(a); and
6. Then when the loan is discharged and the mortgage removed from title , such that the property can be transferred from the custodian’s name to the SMSF’s name under the SISA LRBA rules, an application to have the transfer exempt under s.34(1)(b) is made – this exemption applies because the apparent purchaser is just transferring the mere legal title back to the real purchaser (the SMSF) who has been the sole beneficial owner through the ownership period. Alternatively, the SMSF trustee may direct the custodian to sell the property to a third party, in which case the purchase will pay ad valorem duty on acquiring the property.

When to Seek Advice

If you are unsure about the implications of a proposed LRBA purchase, Aitken Partners is able to provide prompt and accurate advice from both a Victorian property law perspective and tax law (Federal and State) perspective. Please contact Marco Saccotelli, Special Counsel or Julie Maxfield, Principal at Aitken Partners.