It is very important to make an informed decision when
considering whether it is better to have individuals or a company
as the trustee of a self managed superannuation fund (SMSF).
ATO statistics show that a large majority of SMSFs opt for
individual trustees. This probably has a lot to do with people
opting for the quickest and what may seem to be the easiest and
cheapest option, however this decision could end up costing you
more in the long run.
There are practical issues to consider when deciding on a
preferred structure. Let's take a look at some important
considerations when deciding which option is right for you:
Cost and efficiency of processes
There are initial establishment costs for a new trustee company
(which preferably should be an ASIC special purpose company) and
also a small annual ASIC levy associated with the company.
Although you may not have the same initial set up and running
costs when individuals are trustees, appointing an individual
trustee means that the legal ownership of the assets must change
each time there is a change in trustee. This is because when a new
member joins an existing fund, that person must either become an
individual trustee, or become a director of the company trustee.
This may require property and shares to be transferred, trading
accounts to be amended, and bank account details to be altered.
This is where the complications and unexpected costs of having
individual trustees tend to arise.
It is much easier to appoint a person as the director of a
company, than it is to make the person an individual trustee of the
fund. Appointing a director requires a simple form and notification
to ASIC rather than transferring the ownership of all fund
Clarity of ownership & asset protection
The relevant superannuation legislation requires that the assets
of the fund must be kept separate from any assets held personally
by the trustee. The use of a corporate trustee, with a separate
identity, reduces the risk of personal assets becoming intermingled
with fund assets.
Regardless of the trustee structure, the responsibilities of
those acting in trustee capacities for a superannuation fund
(either individually or as a director of a company) are the same.
All trustees are liable to members for any losses incurred as a
result of a breach of trust. Individual trustees are personally
Given that a corporate trustee company is subject to limited
liability, this may provide greater protection of personal assets.
However, the protection may be diminished or disappear completely
if the directors do not fulfil their duties and responsibilities
under the Corporations Act and other legislation. As such,
regulators such as ASIC, the ATO and APRA may pursue the directors
personally for penalties arising out of the breach of the
Estate planning flexibility and perpetual succession
A corporate trustee ensures greater flexibility for estate
planning as the trustee does not change as a result of the death of
a member. Where there are individual trustees, the death of a
member requires there to be a change of trustee, and this gives
rise to significant administrative costs at an inopportune
Unlike people, a company does not die. As such, the death of a
member will not impact on the holding of investments within the
fund. If individual trustees are adopted, on the death of a
member/trustee, legal title to all the assets must be transferred
from the deceased member to the continuing members. This can take
some time as the deceased member's personal representative will
need to be formally appointed to act in the deceased's
Clearly there are more than just cost considerations to address
when deciding on the trustee structure for your SMSF. It is
important to take some time to understand the implications of your
decision and make sure you receive the input of your legal and
financial advisors so you can make an informed decision.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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