Having a self managed super fund (SMSF) gives you a much higher level of control over your retirement funds. After you’ve decided that an SMSF is for you, you have to decide on the trustee structure for your SMSF – Corporate or Individual.
This article will compare the aspects of both structures – bear in mind there is no right or wrong answer. You should choose the structure that best suits your needs and the needs of the members in your fund.
- Generally more costly as a company has to be established to act solely as trustee of the fund.
- No additional costs to have individuals as trustees of the fund.
- An SMSF can have a corporate trustee with one or two directors (provided that one of the directors is a member of the fund). This is an advantage over having individual trustees which requires a minimum of two individuals.
- A minimum of two individuals are required as trustees.
- If the fund has two members and one leaves the fund, a replacement trustee is required or the fund will be non-compliant.
CHANGE OF MEMBER OR TRUSTEE
- If there is a change of member in the fund, the new member becomes a director of the company and the change must be notified to the ATO and ASIC within 28 days.
- There is no change to the company itself, just a change in directors of the company.
- As the fund’s assets are in the name of the company, there is no need to change ownership of the assets when there is a change of director.
- New members of the fund must become trustees and if a member leaves the fund they must resign as a trustee.
- Changes to the membership or trusteeship must be done in accordance with the fund’s trust deed and the SIS Act.
- The ATO must be informed of the change within 28 days.
- The fund’s assets are held in the names of the individual trustees. If there is a change of members, the ownership of the assets will need to change to the new or remaining members of the fund. This can be time consuming and costly.
- If the company has two directors and one dies, the trustee can continue without the need to obtain an additional director (depending on the company’s constitution).
- An SMSF with a corporate trustee can operate with one or two directors provided one of the directors is also a member of the fund.
- This is an advantage compared to the need for a minimum of two individual trustees for the individual trustee structure.
- If the fund has two members and one dies, a replacement trustee must be found for the fund to remain compliant.
- An SMSF can’t have a sole individual trustee.
- Replacing a trustee on death is no different from a change of a trustee (issues mentioned above).
- Fund assets are held in the name of the company thus providing a greater peace of mind around liability.
- This provides a level of protection for the personal assets of the directors of the company trustee.
- Individual trustees hold assets of the fund in their own names and may be subject to liability claims of any legal action is taken against the fund. Thus putting the trustee’s personal assets at risk.
As mentioned at the start of this article, choosing a company structure should depend on your needs and the needs of the members of the fund. However, the corporate trustee structure provides significant advantages in the long run that outweigh the higher establishment costs.
[Photo credit: digitalpimp (Flickr Creative Commons)]