When setting up a new SMSF, one of the decisions you’ll need to make is whether you want to pay to establish a new company to act as a corporate trustee. The alternative option is appointing the members as individual trustees, which is initially cheaper, but may have downsides in the long run.
A key benefit of having a corporate SMSF trustee is that recording ownership of assets like shares and property is easier. The ATO strictly requires that SMSF assets must be held in the name of the trustee(s). If an SMSF has individual trustees, every member will need to be a trustee and the title to all assets will need to be recorded in all of the members’ names. This means that each time a member joins or leaves the fund, the title to all SMSF assets must be updated.
On the other hand, if the SMSF has a corporate trustee, the directors of that company will change, but the company itself will simply continue to hold title to the fund assets.
A change in members and therefore individual trustees also creates more internal paperwork for the fund. To remove or appoint an individual trustee, SMSFs generally need to have formal “change of trustee” documents prepared. This is usually more expensive and complicated than the process of appointing or removing a company director.
Another great advantage of a corporate SMSF trustee is that it makes it easier to comply with the legal requirement to keep the assets of the SMSF separate from any assets the members own personally. Corporate trustees are also beneficial for single-member SMSFs, in which case the sole member can be the sole director of the trustee company and exercise full control over the fund. If the fund has individual trustees, the sole member must by law appoint a second trustee to help run the fund.
Setting up a company involves the initial establishment costs, including ASIC’s registration fee of $488, plus ongoing annual fees payable to ASIC (usually $263 p.a. for most companies, but only $53 for a “special purpose” superannuation trustee company).
Talk to us if you’re planning to start a new SMSF, or are thinking of switching your existing SMSF to a corporate trustee structure. We can help you evaluate your trustee options, handle the necessary documentation and company registration, and provide full support on all aspects of running your SMSF.