Trustee Structure - Corporate Trustee vs Individual Trustees for a SMSF?


A Self Managed Super Fund (SMSF) is required to have a trustee. This SMSF trustee can be two or more individual persons (maximum of 4) or a company (known as a corporate trustee).
A SMSF can have up to 4 members and as little as 1 member. If individual trustees are opted for, if there is more than 1 member then all members will be trustees. However, in a single member fund a second trustee is required, who does not have to be a member of the fund (so you need to find someone you trust, who will be a joint trustee of your SMSF and know all your business).
If a corporate trustee is used, all members are directors and a single member fund can have just the one director.

It is widely accepted by professionals and the ATO that a corporate trustee is superior. We highly recommend this structure (vs individual trustees) and here are some of the reasons why:

  • Continuous Succession - the corporate entity cannot die, thus has an indefinite life span.
  • Greater Administrative Efficiency
  • Greater flexibility to pay lump sums or pensions
  • Greater estate planning flexibility
  • Greater asset protection
  • Sole member SMSF's just need the one director, where if individual trustees are used, you need to find someone else - you must have two individual trustees.

For the $1,200 odd dollars extra in setting up a corporate trustee structure, it is well worth it. Be wary of anyone recommending strongly to set up a structure of individual trustees. Usually, this is done as it is a cheaper set up fee or someone setting up a SMSF who is not fully informed.

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Corporate Trustee Structure

Investment are purchased and held in the following way:
Example Superannuation Nominees Pty Ltd as trustee for Example Superannuation Fund

Individual Trustee Structure

 


 A note of experience...

We have seen time again a structure with individual trustees (who we have acquired as clients after they have been established) in the form of a husband and wife, who have all the assets in both their names as trustees for the Self Managed Super Fund. This is perfectly correct, as it is a two member fund with two individual trustees (husband and wife).

As is required, all assets must be held in the name of the trustee(s) in trust for the SMSF. Often, the husband pre deceases the wife. When this happens in an individual trustee structure, the wife must find someone else to be a trustee with her (as a single member fund with an individual trustee structure, must have a minimum of two trustees) and all the investments need to be changed to reflect the new trustee (and remove the husband). Can you imagine the administrative task and the fees attached with accountants or solicitors writing to every investments share registry to request this change or changing the title of a property?

Let me tell you from experience, the pain we see people go through to get this up to speed, would be eased considerably, if a corporate trustee was in place to begin with. Simply, the husband would be removed as director. No assets need to be changed, as they are purchased in the name of the company.
So before you think about saving a quick $1,200 odd for the initial cost of a company, seriously consider the future costs. $2,000 to $5,000 may not be uncommon if a professional is used to update names on investments. Not to mention the difficulty in administration of moving member's in and out of the fund.

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