If you’re looking for a straightforward way to hold legal title to an asset for someone else-without handing over day‑to‑day control-a bare trust can be a smart, low‑friction option.
Businesses use bare trusts in many scenarios: during property settlements, for nominee shareholding, to streamline deal execution, or to satisfy financing requirements. They’re popular because they separate “who’s on title” from “who benefits,” while keeping the paperwork lean.
In this guide, we’ll cover what a bare trust is in Australia, common use cases for business owners, how to set one up properly, and the key legal and tax considerations to keep in mind. By the end, you’ll know the key decisions to make, the typical steps involved, and the documents you’ll likely need.
Important: This guide provides general information only and is not tax or financial advice. Always speak with your accountant and a lawyer about your specific circumstances, especially where land, duty, GST or CGT are involved.
What Is A Bare Trust In Australia?
A bare trust (also called a simple trust or nominee arrangement) is a legal relationship where a trustee holds an asset’s legal title for the benefit of a beneficiary (or beneficiaries), and has no discretion about what to do with the asset. In practical terms, the trustee must act strictly on the beneficiary’s instructions.
Two features make bare trusts especially attractive to business owners:
- Simplicity: The trustee’s powers are narrow and administrative. They don’t decide who gets income or capital, and there’s typically no distribution discretion.
- Separation of title and benefit: The trustee’s name can appear on title or a register while the beneficiary enjoys the equitable interest, including the entitlement to income and capital.
While many bare trusts are set up for a single named beneficiary, a bare trust can also be drafted for more than one beneficiary-provided entitlements are fixed and the trustee has no discretion. The key is that the trustee’s role remains limited and mechanical.
Because a trust is still a trust, it’s important to record the arrangement in a formal Deed (often called a nominee deed or bare trust deed) so rights and obligations are clear from day one.
When Would A Business Use A Bare Trust?
Bare trusts show up in many commercial settings. Common examples include:
- Interim title holding during a transaction: A nominee company might hold legal title to real property, equipment or IP on a bare trust while settlement, consent or financing steps are completed.
- Nominee shareholding: A trustee can hold shares “on bare trust” for a founder, employee or investor. The beneficiary is the true owner in equity, even though the trustee’s name appears on the register. If equity is spread across multiple co‑founders or investors, a tailored Shareholders Agreement should sit alongside any nominee arrangement.
- Security and finance: Lenders or investors sometimes require legal title to sit with a trustee until conditions are satisfied. In parallel, many businesses protect their position by registering security interests on the PPSR.
- Group structuring and related parties: In closely held groups, you might temporarily park assets with a trustee while you finalise tax, estate planning or corporate steps.
- Streamlined deal execution: Having a nominee on title can simplify sign‑off and logistics in time‑sensitive transactions-so long as the deed tightly limits the trustee’s powers and requires beneficiary instructions.
Because a bare trust keeps things simple and tightly defined, it’s often the cleanest option when you need a purpose‑specific holder of legal title without the complexity of a discretionary or unit trust.
How Do You Set Up A Bare Trust?
Setting up a bare trust can be quick, but the details matter. Here’s a practical, step‑by‑step approach.
1) Choose The Parties
You’ll need a trustee (an individual or company) and one or more beneficiaries (people or entities with fixed entitlements). Many businesses use a corporate trustee for continuity, clearer governance, and to help ring‑fence personal liability.
2) Define The Trust Property And Purpose
Be specific about what the trustee is holding. For example, “100 ordinary shares in XYZ Pty Ltd” or “freehold title to Lot 1 on DP 123456.”
If there’s a reason or time limit-such as “until settlement occurs” or “until the conditions precedent in the share sale agreement are satisfied”-state that in the deed. Clarity on scope and timing helps avoid disputes and accidental “scope creep.”
3) Draft And Execute The Deed
The deed should confirm the limited nature of the trustee’s role, identify the beneficiary/beneficiaries and their fixed entitlements, and set out how instructions are given and actions are authorised.
Pay close attention to how the deed is signed. For companies, consider execution under section 127 of the Corporations Act 2001 (Cth). Depending on the asset type and your state or territory, you may be able to use electronic signing or you may need wet ink-especially for land dealings-so check your position before you sign. This is where a quick check of your electronic signature options is wise.
4) Handle Registrations And Practical Steps
- Title or register updates: If the asset appears on a register (company share register, IP register, land title), record the trustee appropriately and, where relevant, note the nominee capacity if permitted.
- Money flows: Ensure distributions, dividends or rent are paid to the beneficiary (or as they direct). A bare trustee shouldn’t deal with funds beyond the deed’s scope.
- Tax identifiers: Whether a bare trust needs its own TFN/ABN depends on context (e.g. asset type, the way income is received and administered). In many arrangements, income is assessed to the beneficiary, but there are exceptions. Get tailored guidance alongside your broader trust, ABN and TFN requirements.
5) Keep Records And Instructions
Maintain written beneficiary instructions and trustee acknowledgements. Keep board or director approvals (if a company is the trustee) and a clear paper trail. Good records prove that the trustee is acting purely as nominee and not exercising independent discretion.
6) Plan For The Exit
Most bare trusts are temporary. Think ahead about how the asset will be transferred to the beneficiary (or a third party) when the purpose is complete. That often involves a short transfer deed or Deed of Assignment and updates to any relevant registers (e.g. share register or land titles office). For dutiable property, check transfer duty implications and timing before you move anything.
Legal, Tax And Compliance Considerations
Bare trusts are designed to be simple-but “simple” doesn’t mean “no risk.” Keep these key points in mind.
Trustee Duties And Liability
The trustee owes duties to the beneficiary to act according to the deed and applicable law. If the trustee goes beyond its limited role or mishandles funds, it can be personally liable. Using a corporate trustee and setting clear internal approval processes can help manage risk.
Clarity Of Intent
Ambiguity is risky. If your deed is vague, the arrangement could be confused with a discretionary trust, partnership or agency relationship-each with different legal and tax outcomes. Use clear wording that the trustee holds the property on a bare (simple) trust for the identified beneficiary/beneficiaries with no discretion.
In many bare trust arrangements, income and gains are treated as if they were derived directly by the beneficiary (because the beneficiary holds the beneficial interest). However, outcomes vary with asset types and the administration of income and expenses.
Talk to your accountant about CGT events on transfers into or out of the bare trust, GST registration or attribution in your specific scenario, and any state or territory duties. This is especially important for real property, business assets and situations involving refinancing or security releases.
Stamp Duty And Land Dealings
Declarations of trust and nominee arrangements over land can attract duty in some states and territories, or require specific forms and strict lodgement timeframes. Some jurisdictions impose duty on a declaration of trust itself, even without a transfer. Get advice before you sign any deed or lodge anything with the titles office.
Corporate Governance And Registers
Nominee shareholding arrangements work best when your company documents align with reality. Keep the share register up to date and ensure your Shareholders Agreement and board processes reflect who holds legal title, who is the beneficial owner, and how voting, dividends and exits are handled in practice.
Regulatory And Financing Requirements
If a bare trust relates to a financing arrangement, consider how security interests are documented (and whether registrations on the PPSR are required). Counterparties-such as lenders, landlords and suppliers-may ask to review the deed to confirm who can give binding instructions and sign documents on behalf of the beneficial owner.
Bare Trusts Vs Other Trusts And Structures
Choosing the right structure comes down to purpose:
- Bare trust: Minimal trustee powers, fixed beneficiaries, commonly used for holding title for a specific purpose or period, nominee shareholding, and simple transactional needs. Not designed for income splitting or asset protection strategies.
- Discretionary (family) trust: Trustee has discretion to distribute income and capital among a class of beneficiaries. Useful for flexibility, but requires active management and more complex record‑keeping.
- Unit trust: Beneficiaries hold units (similar to shareholdings), and entitlements are usually proportional to units. This often suits joint ventures and is commonly paired with a tailored Unitholders Agreement.
- Company ownership: In some cases, holding or transferring assets via a company (rather than a trust) may be more suitable-for example, where limited liability or future capital raisings are priorities.
Where shares are involved, some owners prefer a nominee arrangement to reflect that they’re beneficially holding shares through a trust while a nominee appears on the register. The key is aligning documentation with how you intend to operate day to day.
What Documents Might You Need?
Every business is different, but if you’re adopting a bare trust, you’ll likely need some or all of the following.
- Bare Trust Deed / Nominee Deed: Records the trustee holding specific property for the fixed beneficiary/beneficiaries, limits trustee powers, and sets out how instructions are given. This should be executed as a Deed with correct signing formalities (consider section 127 and local rules for electronic signing).
- Transaction Deeds (Assignment/Transfer): If the bare trust is used during a deal, you may need a short transfer deed or Deed of Assignment when the asset moves from the trustee to the beneficiary or a third party, plus register updates.
- Shareholders Agreement: If the asset is company shares held for a founder, employee or investor, a Shareholders Agreement should govern decision‑making, voting, dividends, exits and disputes.
- Board And Register Updates: Keep minutes or resolutions authorising trustee actions, maintain an accurate share register, and ensure your cap table reflects beneficial ownership alongside legal title.
- Execution Processes: Implement a signing checklist covering who signs, whether you rely on electronic signatures, and when to use section 127 execution for companies.
- Tax And Duty Filings: Confirm any state or territory duty forms (including declarations of trust where relevant) and ATO registrations connected to your structure and assets, considered alongside your trust, ABN and TFN position.
Good paperwork keeps the trust “bare” in practice: the trustee acts only when instructed, money flows correctly, and everyone understands their role.
Key Takeaways
- A bare trust is a simple nominee arrangement: the trustee holds legal title and follows instructions, while the beneficiary holds the beneficial interest and enjoys the income and capital.
- They’re useful for interim title holding during transactions, nominee shareholding, and financing or security contexts where separating title from benefit helps execution.
- Set‑up is quick but formal: define the trust property and purpose precisely, sign an appropriate deed, and follow correct execution formalities (including any state‑based requirements for land dealings).
- Tax treatment often follows the beneficiary in a bare trust, but outcomes vary-get tailored tax advice on CGT, GST and duty, particularly for real property or business assets.
- Keep governance aligned: update company registers and board records, and pair nominee shareholding with a clear Shareholders Agreement where relevant.
- For finance or security arrangements, consider PPSR registrations and ensure counterparties know who can give binding instructions.
- If you need distribution flexibility, multiple classes of beneficiaries, or asset protection features, consider a discretionary or unit trust-or a company-rather than a bare trust.
If you’d like a consultation on setting up a bare trust for your business, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.
