SMSF Corporate Trustee or Individual Trustee?
When establishing a self managed super fund, the first decision you’ll need to make is whether you opt for a SMSF corporate trustee or an individual trustee to oversee the running of the SMSF. The key differences between an SMSF corporate trustee and an individual trustee are likely to influence your choice. We hope our analysis below can help you in making this decision.
What is an SMSF Individual Trustee?
An individual trustee is a person who has been appointed to operate a self managed super fund. A single member SMSF (a fund created to benefit one person) must have two individual trustees, and at least one of them must be a fund member. In the event that one trustee is an employee of the other, the two trustees must also be relatives. In the case of an SMSF with up to four members, all members must be trustees, and all trustees must be members of the fund. No member can be an employee of another member, unless they’re related to each other.
What is an SMSF Corporate Trustee?
If you don’t want to have an individual trustee or trustees operating the SMSF, the alternative option is to open the self managed super fund under the name of a corporate entity. For a fund that holds the superannuation of more than one member, a SMSF must have a maximum of four members and all must be directors of the company (a company can be established for the sole purpose of operating the self managed super fund). For single member funds operated by an SMSF corporate trustee, there can be no more than two directors, and the fund member must either be the sole director or one of the two in charge.
The Benefits of Having Individual Trustees
- Low costs to establish – We offer most competitive price for setup services with individual trustees.
- Less costs to run your SMSF over time – There are no ASIC review forms and review fees every year.
If you choose this structure by appointing another trustee who does not have any member balance in the SMSF, you will need to consider the following:
- the extra trustee is not required to have any member balance but the extra trustee will be the legal owner of the assets in the SMSF
- the extra trustee will be responsible for the SMSF operation. Even you own your member balance but it is managed by both trustees not just yourself. All the trustees have equal responsibility to manage the SMSF regardless their member balances
The Benefits of Having a Corporate Trustee
- Making changes to the SMSF is easy – If new members join the SMSF or an existing member leaves the fund, there is no need to update the trust deed, report the changes to the regulator and transfer all the assets held by the super fund into the new trustee(s) name.
- Borrowing in Super Funds – If you want to borrow from the bank to buy properties or other investments, normally they require there to be a SMSF corporate trustee.
- Single Member Funds – If you have a company as the trustee, you can set up a DIY super where you are the only member. The advantage is that you have full control over the running of the super fund. Otherwise, you have to make another person the trustee to join you in making decisions on managing your SMSF.
- Succession Issues – In the circumstances of death or incapacity of the super fund members, a corporate trustee still has full control of the fund. The control of the trustee company also can be passed in line with deceased members’ estate planning goals.
- Reduced trustee litigation exposure – Where the trustee of a fund is subject to litigation, the SMSF corporate trustee normally provides additional protection by limiting liability to the assets of the company, not those of the underlying directors.
The Cost of Setting Up and Having a Corporate Trustee
iCare Super charges an upfront fee of $880 (including GST) to incorporate your trustee company and $220 for the ASIC annual return.
Can I Change My SMSF from Individual to Corporate Trustee?
Yes, you can. But as discussed above, you need to update the trust deed and report the changes to ATO and relative asset registries, etc. If you have to change the trustee structure, or make the decision to do so, we are right here to help you. Please contact iCare Super to discuss in detail.