Tuesday, November 5, 2013

Corporate trustees and SMSFs

Many specialist advisers to self managed superannuation funds (SMSFs) recommend the use of a corporate trustee, as opposed to individual trustees.

While the initial setup costs of a corporate trustee are generally higher than individuals, there are a range of reasons that the use of a company is beneficial, including:
  1. as other posts have demonstrated, the use of a corporate trustee provides limited liability protection. This can be particularly important if the SMSF owns real property; 
  2. special purpose corporate trustees of an SMSF are entitled to discounted annual ASIC fees; 
  3. record keeping and compliance is significantly improved with a special purpose corporate trustee in terms of what the auditor (and ultimately the Tax Office) expects to see; 
  4. from a succession planning perspective, it is significantly easier to regulate the control of a corporate trustee (i.e. by simply changing the directors from time to time) as opposed to individual trustees, where each time an individual trustee changes, there is often a myriad of documentation that needs preparing and notifications that must be made; and 
  5. particularly in relation to sole member funds, the use of a corporate trustee significantly simplifies the overall structure of a SMSF, as a sole director company is permissible. In contrast, it is impossible to create a valid SMSF with an individual trustee and sole member (there must always be an additional individual who acts as a co-trustee in this instance). 
Until next week.