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:
- 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;
- special purpose corporate trustees of an SMSF are entitled to discounted annual ASIC fees;
- 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;
- 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
- 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.