SMSF – Individual or Corporate Trustee?

The issue of whether a Self Manged Super Fund (SMSF) should have an Individual or Corporate Trustee is often raised and it is a decision that requires careful consideration.

We outline some of the issues relevant to each structure in the following tables.

The different Trustee structures for a SMSF are:

–  Individual Trustees, where each member of the Fund is a Trustee.
–  A Corporate Trustee, where each member of the Fund is a Director of the Trustee Company.

 

Individual Trustees

Setting up your Fund
Establishment costs The Fund can be less costly to establish as you do not have to set up a separate Company to act as Trustee.
Single
member
Funds
You can have a single member Fund but only if you have a second Individual Trustee (that is, you cannot be the only Trustee).
Governing rules
Trustees must follow the rules in the:
–  Fund’s Trust deed
–  Super laws.
Ongoing administration & reporting
Administration The Fund has fewer reporting obligations and can be simpler to administer.
Reporting As a Trustee, you must:
–  Appoint an independent auditor to audit the Fund’s operations each year
–  Lodge a SMSF annual return for the fund
–  Pay an annual supervisory levy to the ATO.
Changes to Trustees and members
Administration
of Fund assets
Fund assets should be held in the name of all Individual Trustees as Trustees for the Fund.If there is a change in Trustees, you need to:
–  Change the name on the ownership documents (such as a title deed) for each fund asset
–  Notify all relevant authorities/registries.This can be a costly and time consuming process.
Single
member
Funds
If your Fund has two Trustees and one leaves or dies, you must appoint another Trustee in their place for your Fund to continue to be an SMSF.
Reporting If there is a change in Trustees or members, you must notify the ATO within 28 days.
Paying benefits to members
Your Fund can pay lump sum benefits if the Trust deed specifically allows it to.

 

Corporate Trustee

Setting up your Fund
Establishment costs It can be more costly to set up the Fund initially as you need to establish a Company (ASIC fee) to act as Trustee (if you do not already have a Company).There are also associated annual fees.
Single
member
Funds
You can have a single member Fund if either:
–  the member is one of only two Directors of the Corporate Trustee and the other Director is not an employee of the member director, or
–  the member is the only Director (Sole Director) of the Corporate Trustee (Company).
Governing rules
Directors of the Corporate Trustee must follow the rules in the:-  Fund’s Trust deed
–  Super laws
–  Company’s constitution
–  Corporations Act 2001 (administered by ASIC).
Ongoing administration & reporting
Administration Having a Corporate Trustee can make it easier to:
–  Administer the ownership of Fund assets
–  Keep the assets of the Fund separate from any personal or business assets.
Reporting You will have the same requirements as an Individual Trustee, plus as a Director of the Corporate Trustee, you have reporting obligations to ASIC.You also must pay an annual review fee to ASIC.
Changes to Trustees and members
Administration
of Fund assets
Fund assets should be held in the name of the company as Trustee for the Fund.If there is a change in Directors, you do not have to change the name on the ownership documents for each Fund asset (as the Trustee is still the same).
Single
member
Funds
If the Company has two Directors, and one leaves you do not have to replace them (a Corporate Trustee can have a single Director). The Trustee does not change if a member or Director leaves the Fund.
Reporting If there is a change in Trustees or members, you must notify the ATO within 28 days.If there is a change in Directors, you must:
–  Notify the ATO within 28 days
–  Report the change to ASIC within 28 days.
Paying benefits to members
Your Fund can pay benefits as a lump sum or pension.

*table sourced from Australian Tax Office.

 

If you are contemplating an SMSF, it is worthwhile seeking advice from a SMSF professional to ensure you understand the benefits and costs for each type of Trustee structure.

Contact our office for further information and a detailed discussion.

 

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