Individual vs Corporate Trustee for Existing Funds

When setting up a new fund, our preference and industry best practice is to use an SMSF sole purpose company as trustee. For this reason all the new SMSFs we establish include the provision of a corporate trustee. If you have an existing fund it may have individual trustees, which was the old common practice. However you can change the trustee of your fund and obtain access the many advantages of a corporate trustee. A comparison table below provides details of these advantages.

The only real disadvantages are the costs and the possibly time consuming process involved in updating the investments to reflect the name of the new trustee. Costs include the purchase and appointment of a company at $990 (including trustee change notifications to the ATO) as well as out-of-pocket costs such as broker fees for share updates and legal fees for property title updates. The ongoing annual cost for management of the company secretarial and registered office matters for your fund is $220 pa plus the annual ASIC fee, which is currently $41.

Our office can assist you with the required changes to your investments or you can refer to our fact sheet “Updating Investments for Change of Trustee” for an asset specific guide of what is required. To arrange a corporate trustee or obtain assistance with the investment updates please contact our Trustee Services Hotline on 1300 968 776.

Corporate Trustee Individual Trustees
Continuous succession
A company has an indefinite life span; in other words, it cannot die. Therefore, a corporate trustee can make control of an SMSF more certain in the circumstances of the death or incapacity of a member.		 Ceases upon death
If the SMSF has individual trustees, e.g., a mum and dad SMSF, then timely action must be taken on the death of a member to ensure the trustee/member rules are satisfied. (SMSF rules do not allow a sole individual trustee/member SMSF.)
Administrative efficiency
When members are admitted to, or cease membership of the SMSF, all that is required is that the person becomes, or ceases to be, a director of the corporate trustee. The corporate trustee does not change as a result. Therefore, title to all the assets of the SMSF remains in the name of the corporate trustee.		 Extra and costly paperwork generally required
To introduce a new member to an SMSF with individual trustees requires that person to become a trustee. As trust assets must be held in the names of the trustees, this will require the title to all assets to be transferred to the new trustees when a member is admitted to or exits the fund.
Enduring Power of Attorney (EPoA)
The ATO recently clarified the use of an EPoA requires the removal of the Trustee and appointment of the person who is to act under the EPoA. With a corporate trustee, this is a simple change of directors. There is also the ability to have an alternate director who is an EPoA, which can be used easily on a regular basis.		 Enduring Power of Attorney (EPoA)
The ATO requirement to formally remove and appoint Trustees when using an EPoA, is more costly and complex than a simple change of directors. It is complicated by the fact that all assets must be in the names of the current trustees. So all assets would need to be updated and then fully reversed when the Trustee steps back into the role again.
Sole member SMSF
You can have an SMSF where one individual is both the sole member and the sole director.		 Sole member SMSF
A sole member SMSF must have 2 individual trustees.
Greater asset protection
As companies are subject to limited liability, a corporate trustee will provide greater protection where a party sues the trustee for damages.		 Less asset protection
If an individual trustee suffers any liability, the trustee’s personal assets may be exposed.
Estate planning flexibility
A corporate trustee ensures greater flexibility for estate planning, as the trustee does not change as a result of the death of a member.		 Extra administration and costs
The death of a member requires there to be a change of trustee, and this gives rise to considerable administrative work and costs at an already difficult and inopportune time.

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