Corporate Trustee In SMSF

A Corporate Trustee is a common structure used in Australia’s Self-Managed Superannuation Funds (SMSFs). Instead of having individual trustees for the SMSF, a corporate entity (a company) acts as the fund’s trustee. This structure has its advantages and considerations:

Advantages of Using a Corporate Trustee:

1. Limited Liability: One of the main advantages of a corporate trustee is limited liability. Since the trustee is a separate legal entity (the company), the personal assets of the SMSF members are generally protected from the SMSF’s liabilities. This can provide an additional layer of asset protection.
2. Easier Succession Planning: In case of changes in membership or trusteeship due to death, retirement, or other reasons, it is simpler to transfer ownership of the SMSF’s assets with a corporate trustee. This can help streamline the management of the fund over time.
3. Ownership and Control: Shares in the corporate trustee can be transferred or sold, making it easier to change the control and ownership of the SMSF without the need to update property titles or other legal documents.
4. Borrowing: If the SMSF intends to borrow funds to invest in property (limited recourse borrowing arrangements), some lenders prefer the use of a corporate trustee as it can make the borrowing process smoother.

Considerations and Requirements:

1. Incorporation and Setup: Setting up a corporate trustee involves registering a company with the Australian Securities and Investments Commission (ASIC). This requires additional costs and ongoing regulatory compliance compared to individual trustees.
2. Ongoing Compliance: The corporate trustee must meet the same regulatory and reporting requirements as individual trustees. This includes ensuring that the SMSF’s investment decisions, administration, and record-keeping comply with the Superannuation Industry (Supervision) Act 1993 (SIS Act) and related regulations.
3. Costs: Initial costs are associated with establishing a company and ongoing administrative costs such as annual ASIC fees, company tax returns, and any other regulatory obligations.
4. Decision-Making: The directors of the corporate trustee make decisions related to the SMSF. If there are multiple directors, decisions need to be made collectively.
5. Separation of Roles: The corporate trustee structure clearly separates the roles of trustees from the members, which can be an advantage for estate planning and asset protection. However, some individuals may prefer the more direct control that individual trustees offer.

When considering whether to use a corporate trustee for your SMSF, it’s essential to weigh the advantages and disadvantages based on your specific circumstances. Consulting with financial advisors, accountants, and legal professionals specialising in SMSFs can help you make an informed decision aligning with your financial goals and objectives. Additionally, make sure to stay updated with the latest regulations and requirements to ensure compliance with SMSF rules.