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.
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. |
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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. |
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). |
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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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