Self-Managed Super Funds (SMSFs) give members more control over their superannuation. They can be a great vehicle for building and protecting retirement savings. Members are required to be trustees of their SMSF, or appoint a corporate trustee that they control.
When setting up your SMSF it may seem simpler and cheaper to act as individual trustees. However, a corporate trustee may be less risky. Key differences between the two include:
If the SMSF faces any litigation, having a corporate trustee means liability is limited to the assets of the fund. Individual trustees place their personal assets at risk.
Corporate trustees avoid ambiguity by clearly separating SMSF assets and personal assets. Individual trustees may find it hard to demonstrate which assets are owned on behalf of their SMSF, and which are owned personally.
A corporate trustee will remain intact upon the death of a member. Conversely, the death of a member/individual trustee will lead to a change in legal ownership. If there were only 2 trustees, a new trustee needs to be appointed. This reduces the control of the surviving member.
Adding or removing a fund member means adding or removing an individual trustee. This is a change in the legal owner of the fund’s assets, and may involve updating your records with the bank, share registry and, in the case of real property, the OSR.
With a corporate trustee, the process is more straightforward. There will be a change in directorship of the trustee company, but no change in the legal ownership of the fund’s assets.
There is an upfront fee for establishing a new company to act as trustee, as well as an annual ASIC filing fee. There are no additional costs associated with acting as an individual trustee.