You can choose one of the following structures for your fund:
- up to four individual trustees
- a corporate trustee (essentially, a company acting as trustee for the fund).
You should discuss this decision with an SMSF professional. The two structures differ in terms of:
| Corporate trustee | Inidividual trustee |
| Pro | - it can be easy and more cost effective to add or remove members
- legal ownership of assets does not change when a director/member is added or removed
- it’s the only option if you want to manage your SMSF by yourself
- there may be fewer problems for succession planning where you have two members and one passes away, as the remaining member can stay as the sole director of the trustee company
- ATO administrative penalties apply to the corporate trustee, not each individual director.
- Every time there is a change to the trustee structure, the ownership documentation of every investment and bank account must change. Where an SMSF has an individual trustee structure, this will occur every time a member joins or leaves the fund, and also when a trustee dies. This can cause stress at the most sensitive of times. There is a limited time period to satisfy the trustee and member rules.For a corporate trustee, the trustee does not change where members leave or join the fund, there is only a change in directorship.
- Having a sole purpose corporate trustee makes ownership of assets quite clear. In contrast, assets held by individual trustees can look very similar to the personal or joint accounts held by trustees.
| - it’s cheaper to set up than a corporate structure and may be cheaper to run – you don’t need to set up a company and there are no ASIC fees
- because it’s not a company, you don’t need to abide by additional regulations that companies are bound by.
- Fewer procedural issues to deal with, as there are more flexible requirements for holding trustee meetings and no need to comply with a company constitution
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| Con | - additional expenses – because you’re setting up a company, there are more establishment and running costs involved (unless you set up a special purpose company whose only purpose is to act as your corporate trustee; in this case, the running costs can be reduced, and you don’t have to lodge an additional tax return for the company, only for your SMSF).
- your SMSF is also bound by corporation legislation.
| - always having to have two trustees, which can be problematic for succession planning (e.g. where there are two members and one leaves or passes away)
- it may be cumbersome to add or remove members and change the ownership of your assets.
- having trustees as legal owner of assets can easily lead to SMSF and personal assets inadvertently being mixed.
- Declarations of trust may be required for certain asset types, such as property.
- ATO administrative penalties apply to each individual trustee. This can result in penalties of up to four times that of a corporate trustee.
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| Fee | - A special purpose company (proprietary) - $56
- Check fee here
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Weighing up the different SMSF trustee structures
you need to ensure that your SMSF trustee structure complements your overall financial goals, and this isn’t always easy to work out on your own.
Before proceeding with your decision, we recommend you discuss these questions, among others, with your family and adviser:
- Are you aware of all the associated costs and regulatory implications for each SMSF trustee structure?
- What assets do you wish to invest in (e.g. property or shares)? Some structures are better suited to different types of investing.
- What would happen if one of the trustees were to leave the fund or pass away?
- Will you have other assets outside of your SMSF? And what protections do you have in place to protect these in case a claim is made against your fund? In an individual structure your assets outside of your fund are not protected from liability claims.
https://www.dixon.com.au/smsf/smsf-trustee-individual-or-corporate
https://www.commbank.com.au/articles/smsf/smsf-corporate-trustee-details.html
https://www.heffron.com.au/resources/individual-vs-corporate-trustees
https://www.cleardocs.com/clearlaw/superannuation/smsf-corporate-individual-differences.html
https://www.superannuationwarehouse.com.au/smsf-setup/smsf-corporate-trustee/
Last modified: 01 Jul 2020 QC 23310
