Choosing your SMSF structure: Corporate trustee vs individual

Key benefits of a corporate trustee SMSF structure

Corporate trustee set up fees

You must pay an initial fee to ASIC (the government body that regulates companies) to set up your Company and then an annual fee each year. Neither of these fees apply if you have individual trustees. But all in all, most people would agree that the benefits outweigh the costs.

It’s worth noting that the annual fee is quite low if the trustee company is set up as a “special purpose” company. This is a type of company that is only allowed to be the trustee of a super fund – it can’t do anything else like run a business, be the trustee of a family trust etc.

We also recommend that the company you set up to be the corporate trustee of your SMSF is set up exclusively for that purpose. You might have another company that (say) runs your business or is the trustee of your family trust. Don't use that company as the trustee of your SMSF, set up a new company.

There are a few reasons for this including:

• Complete clarity – As we mentioned earlier, a core requirement for SMSFs is that its assets are clearly owned by the fund. This can become murky when the owner (the trustee) also owns other assets. This is a point your auditors are required to verify regularly and sometimes providing the necessary proof creates additional work for you.
• Legal protection – If there is a legal threat to the company via its other activities, the SMSF’s assets could be exposed. Even though they should be legally protected because they are, in fact, owned beneficially for the SMSF, simply having to prove it potentially adds pressure to an already problematic situation.
• Control over directorship – SMSFs have specific rules about who can be a director of the trustee company. These same rules don’t apply to other entities. A change in either your SMSF or other entities could put you in a position where the directors make sense for your SMSF but not your other entities (or vice versa).
  

To set up a corporate trustee for an SMSF, you’ll need a ‘Director ID’

All directors of a company will need to provide a special number known as a "Director ID". That number is unique to you. If you don’t have one already, this page provides some more information and includes a link to the website where you can apply).

If you're already a director of a company you won't need a new one for your SMSF’s corporate trustee.

You may also be interested in...

• Who can set up an SMSF together?
• Combining super for shared investing

This article is for general information only. It does not constitute financial product advice and has been prepared without taking into account any individual's personal objectives, situation or needs. It is not intended to be a complete summary of the issues and should not be relied upon without seeking advice specific to your circumstances.