Even though a SMSF is, in essence, self managed, there are rules and conditions surrounding it. These include who can be members of the SMSF and who can be the trustees. It is easy to say that virtually anyone can be a member as long as they are tax residents of Australia, but a SMSF isn’t for everyone. It requires money and dedication because it must be managed constantly, and this requires time, skill and a lot of work.
It is the trustees, who are appointed, that manage the trust, but all SMSF members have a say in the major decisions that need to be made. The members also share the financial obligations and, ultimately, the funds.
Who Are the Members?
Single member SMSFs exist, but there can be up to four members at most. In general, the members are from the same family but they can be friends and acquaintances too. One member cannot, however, be employed by another member of the same trust unless these two members are from the same family.
Members do not have to be physically residing in Australia, but they must be tax residents. A person under the age of 18 years old can be a member of a SMSF but they cannot, however, act as a trustee. The same is said for various other legally disabled persons who can be members but not trustees.
Who Are the Trustees?
Because a SMSF is a trust, it must be managed by trustees. In the case of a SMSF, the trustees are members of the trust or a corporation directed by the members. These are the two trustee structures for SMSFs, and they’re a general rule for who can be appointed. The trustees must fulfill their duties for which they cannot be paid for.
There are some exceptions to members of a SMSF being eligible to act as trustees. These include a person who holds a conviction for an offense deemed dishonest, a person who under superannuation law is subject to civil penalties, a person who is under administration or insolvent, and a person who for any reason has been disqualified by the ATO and disallowed to act as trustee of any superannuation fund.
As members of a SMSF have control over their trust, it is in their best interests to ensure they choose the correct trustee structure that will suit their personal needs and be beneficial in the long run. This is because there are slight differences to the two trustee structures. This includes a single member SMSF being allowed to act as trustee and having to include a second trustee who is not a member versus the only member being allowed to be sole director of the acting corporate trustee. Another difference is that assets are held in the name of the members when acting as individual trustees, but if there is a corporate trustee, the assets must be held in the company’s name.