More and more people are considering a Self Managed
Superannuation Fund and should be aware that all SMSFs must have a
trustee. This trustee can be either made up of the individual
members or a company in which individual members are the directors
and the shareholders.
Tony Mitchell, a specialist in commercial law at Stacks Law
Firm, says that while most SMSFs are set up with individual members
as trustees, there are important advantages in having a company as
"Individual trustees can be personally liable for
administration of their SMSF, whereas the directors of a trustee
company enjoy the benefits of limited liability," Mr Mitchell
"One of the most important aspects of a SMSF is ensuring
that fund assets are kept entirely separate from assets of the
members. This separation is much easier to achieve if the
trustee of the SMSF is a company.
"Each individual asset of a SMSF must have the trustee of
the fund recorded as the owner of the asset. If the trustees are
individuals, this requirement can give rise to a significant
administrative burden if there is a change to the membership of the
fund. However, if the trustee is a company, this administrative
burden is avoided."
Mr Mitchell pointed out that if a member of a SMSF dies there is
a lot of paperwork involved. It's easier with a company acting
If an SMSF wants to borrow money to acquire new assets it has to
comply with limited recourse borrowing specified in the
Superannuation Industry (Supervision)
Act. Most banks will not lend money to an SMSF unless its
trustee is a company. Having a company as trustee for an SMSF is
recommended by the Australian Securities and Investment
"In light of all these advantages it is surprising that
most SMSFs in Australia have individuals as their trustees rather
than a company," Mr Mitchell said.
There are some disadvantages in having a company as trustee,
including some additional setup costs and an extra annual
government fee for company trustees, but Mr Mitchell said in most
cases these are well and truly outweighed by the advantages.
"The laws surrounding Self Managed Superannuation Funds can
seem confusing for people who are considering how to manage their
assets in retirement, so it is wise to seek legal advice from
experts in the field," Mr Mitchell said.
"There can be legal complications if an SMSF is not set up
properly in line with all the tax office requirements and with a
trustee arrangement that fits in with each person's needs and
what they hope to achieve."
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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