SMSF instalment warrant law has been in place since 2007 — yet many products still fail to address the SIS Act, the Income Tax Assessment Act, and State stamp duty legislation simultaneously. MGS warrant deeds are drafted to navigate all three, protecting the fund, the members, and the adviser.
The law surrounding warrant trusts and SMSF borrowing has been in place since 2007. Despite this, many products in the market still fail to take account of not only the SIS Act but also the Income Tax Assessment Act 1997 and the various stamp duty Acts of the States.
An SMSF instalment warrant arrangement involves three distinct legal regimes — superannuation law, income tax law, and State revenue law — and a compliant structure must satisfy all three simultaneously. Overlooking any one of them exposes the fund, the trustee, and the adviser to significant risk.
MGS warrant deeds have been drafted to navigate this complexity — addressing absolute entitlement, non-arm's-length income provisions, and stamp duty consequences within a single, cohesive document suite.
Every MGS warrant deed addresses all three
A Limited Recourse Borrowing Arrangement allows an SMSF to borrow money to acquire a single acquirable asset — held in a bare (holding) trust by a custodian company until the loan is repaid. The lender's recourse is limited to that asset alone, protecting the rest of the fund's assets.
The lender may only have recourse to the single acquirable asset held in the bare trust — not to any other assets of the SMSF. If the fund defaults on the loan, the lender takes the asset; the remaining fund assets are shielded.
During the loan period, legal title to the asset is held by the custodian company as bare trustee. The SMSF trustee holds the beneficial interest. On full repayment, legal title transfers to the SMSF — and if absolute entitlement was correctly established, no CGT event arises on that transfer.
The SIS Act requires that the borrowing is used to acquire a single acquirable asset — typically real property or listed shares. The asset cannot be replaced with a different asset while the borrowing is on foot, and improvements must satisfy the “same asset” test or be funded from the fund itself (not borrowed funds).
A separate legal entity — typically a general purpose company — must serve as the bare trust trustee (custodian). The custodian holds legal title on behalf of the SMSF and must remain distinct from the SMSF trustee. MGS provides the custodian company as part of the LRBA bundle.
The MGS Instalment Warrant Kit is available in two versions — one for externally sourced loans from a bank or third-party lender, and one for internally sourced loans where the members or their associates provide the loan funds. The compliance requirements and risks differ significantly between the two.
For LRBAs where the loan is sourced from a bank, credit union, or other independent third-party lender operating on commercial terms. The most straightforward compliance profile — no NALI risk from the loan itself.
For LRBAs where the members or their associates provide the loan funds to the SMSF. The structure must satisfy strict arm's-length requirements to avoid the NALI provisions — otherwise fund income is taxed at 45%, not 15%.
Many warrant trusts in the market contain clauses that trigger significant adverse tax consequences — often unknown to the trustees and advisers involved until the damage is done. Every adviser working with SMSF LRBAs needs to understand these risks.
Many warrant trusts trigger a capital gains event on loan repayment
Where an SMSF borrows from members or their associates — rather than from a bank — the income generated by the asset may be classified as non-arm's-length income (NALI) under the ITAA97. The consequences are severe.
If the ATO characterises income as NALI, all fund income from the arrangement is taxed at the highest marginal rate — currently 45% — rather than the 15% concessional rate that applies to compliant SMSF income.
A related-party loan must be on commercial terms equivalent to those available from an independent lender — including interest rate, security, loan-to-value ratio, and repayment terms. The ATO's Safe Harbour rates provide a benchmark, but every term must be maintained throughout the loan.
A related-party LRBA cannot simply be established once and forgotten. The ATO requires that interest rates are reviewed annually and reset to current Safe Harbour rates where required — or the arrangement risks NALI classification.
The MGS Internal Loan kit includes a loan agreement drafted to meet arm's-length requirements, a checklist confirming all Safe Harbour conditions, and guidance on annual interest rate review — protecting the fund from NALI classification throughout the loan period.
Beyond the CGT and NALI risks, SMSF borrowing carries further compliance obligations that a substandard warrant deed may not address.
The SMSF trustee must be absolutely entitled to the acquirable asset throughout the loan period for the arrangement to work as intended for tax purposes. A deed that fails to establish this — or that contains inconsistent clauses — can cause the whole arrangement to fail.
While an LRBA is on foot, the acquirable asset may not be replaced with a different asset. Improvements to the asset must meet the “same asset” test — the improved asset must be the same asset as the original, not a different one. Failure causes the arrangement to breach section 67A of the SIS Act.
The accounting treatment for an SMSF instalment warrant is different from standard trust accounting. The fund must record the asset and the loan correctly in its accounts — the way the entries are made affects the fund's tax position, member balances, and the Division 296 Tax calculation from 2025–26.
The finalization of the borrowing arrangement — when the loan is fully repaid and legal title transfers to the SMSF — requires careful navigation of State Revenue laws to minimize stamp duty, and precise documentation to confirm no CGT event arises on the transfer.
One of the most commonly overlooked aspects of SMSF borrowing is State revenue law. Stamp duty may be payable at two points in the LRBA lifecycle — on acquisition of the asset by the custodian, and again on transfer of legal title to the SMSF on loan repayment. The rules differ materially between States.
When the custodian company acquires the asset (typically real property), stamp duty is payable on the acquisition in the same way as any other property purchase. The duty is calculated on the purchase price or market value, depending on the State.
When the loan is repaid and legal title transfers from the custodian to the SMSF trustee, some States impose transfer duty on the transaction — effectively double duty on the same asset. Whether exemptions apply, and their conditions, varies by State and requires specific advice before finalization.
Each State and Territory has its own duty legislation and its own approach to SMSF bare trust transfers. NSW, Victoria, Queensland, South Australia, and Western Australia each apply different rules — with different exemption conditions and thresholds. A one-size approach does not work.
Many States provide a duty exemption for the transfer of property from a bare trustee to the beneficial owner on finalization of a bare trust arrangement — but the exemption conditions are specific and must be met precisely. Failure to satisfy the conditions means duty applies in full.
The duty position on finalization often depends on how the arrangement was established — including whether the bare trust was declared before settlement, whether the SMSF was the beneficial owner from day one, and the precise wording of the custodian documentation at the time of acquisition.
For complex LRBA transactions — particularly where significant property values are involved — MGS Private's State Tax Services team can provide specific advice on duty exposure, exemption eligibility, and documentation requirements for each State and Territory.
State Revenue advice is always required before establishing an SMSF LRBA involving real property. The duty exposure on acquisition, and the conditions for any exemption on finalization, must be confirmed with a State tax specialist before the arrangement is entered into — not after. Contact MGS Private's State Tax Services team at (02) 9231 5111 for specific advice.
MGS provides a comprehensive set of resources for registered users — covering the document checklist, accounting entries, CGT problem analysis, and the full instalment warrant brochure. Login to access all materials.
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All prices exclude GST. Both kits are available individually or as discounted bundles with the Instalment Warrant Custodian Company. AML subscribers receive additional discounts on all products ordered through the integrated platform.
| Product | Price (excl. GST) |
|---|---|
| SMSF Instalment Warrant Kit — External Sourced Loan #1For LRBAs where funds are sourced from a bank, credit union or independent third-party lender. Full document suite including bare trust deed, loan agreement, resolutions and compliance checklist. | $400 |
| SMSF Instalment Warrant Kit — Internal Sourced Loan #1For LRBAs where funds are sourced from members or related parties. Includes arm's-length loan agreement, Safe Harbour compliance checklist, bare trust deed, resolutions and NALI guidance. | $900 |
| Instalment Warrant (External Loan) + Custodian Company Bundle Save vs individual pricingDiscounted bundle: SMSF Instalment Warrant Kit (External Loan #1) + Instalment Warrant Custodian Company. The most complete LRBA package for bank-funded borrowings. | From $1,196 |
| Instalment Warrant (Internal Loan) + Custodian Company Bundle Save vs individual pricingDiscounted bundle: SMSF Instalment Warrant Kit (Internal Loan #1) + Instalment Warrant Custodian Company. The complete LRBA package for related-party funded borrowings. | From $1,566 |
| Instalment Warrant Custodian Company — ExtraGeneral purpose company acting as bare trust trustee — ordered separately (not as part of a bundle). Full ASIC registration, constitution and corporate governance documents included. | $896 |
Obtain advice first — then order through your MGS account. The warrant kit and custodian company are delivered together, ready for the LRBA to proceed.
SMSF borrowing carries real risks — obtain advice from a licensed financial adviser and tax specialist before proceeding. Confirm the loan type (external or internal), the asset to be acquired, and the State revenue consequences.
Choose the External Loan Kit ($400) for bank-funded LRBAs, or the Internal Loan Kit ($900) for related-party funded arrangements. Consider the bundle option with the Custodian Company for a complete, discounted package.
Login to your MGS account (or register for free) and complete the warrant kit order form. If you have a Macquarie AML account, your client's KYC data flows in automatically — zero re-entry. AML subscriber pricing applies automatically.
Execute the warrant deed, bare trust deed, and loan agreement. Ensure the custodian company acquires the asset in its capacity as bare trustee before any borrowing is drawn. Review the compliance checklist before settlement.
SMSF instalment warrant arrangements are complex — if you have queries about whether an internal or external loan kit is appropriate, or about converting an existing warrant deed, call our team first.
MGS instalment warrant kits address SIS Act compliance, ITAA97 absolute entitlement, NALI risk, and State stamp duty consequences — in a single, expertly drafted document suite. Available for both external (bank) and internal (related party) loan arrangements.
An SMSF instalment warrant arrangement requires a compliant SMSF deed as its foundation. These are the products most commonly ordered alongside a warrant kit.
The LRBA-compatible MGS SMSF deed — with all 12 compliance kits included as standard. LRBA powers are authorised from the outset. Updated for Division 296 Tax from 1 July 2026. From $400 excl. GST.
View SMSF Products →SMSF Special Purpose Companies (concessional ASIC fee) and Instalment Warrant Custodian Companies — available individually or bundled with the warrant kit at a discounted price. Same-day delivery. $896 excl. GST each.
View Company Products →Complex LRBA transactions involving significant property values require specific State tax advice — on duty exposure, bare trust exemption eligibility, and finalization documentation. MGS Private's State Tax team provides this.
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