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  • Choose individual trustees or a corporate trustee

    You can choose one of the following structures for your fund:

    • up to four individual trustees
    • a corporate trustee (essentially, a company acting as trustee for the fund).

    You should discuss this decision with an SMSF professional. The two structures differ in terms of:

    Duration 2:27. A transcript of SMSF trustees – individual or corporate is also available.

    Differences between SMSF trustee structures

    Note: Single member funds have different trustee features to funds with two to four members. Refer to table 2 for information

    Member and trustee requirements

    Table 1: Comparison of member and trustee requirements for individual and corporate trustees

    Structure

    Features

    Individual trustees

    • Two to four members.
    • Each member of the fund must be a trustee, and each trustee must be a member of the fund.
    • A member cannot be an employee of another member – unless they are relatives.

    Corporate trustee

    • One to four members.
    • Each member of the fund must be a director of the corporate trustee, and each director of the corporate trustee must be a member of the fund.
    • A member cannot be an employee of another member – unless they are relatives.
    Table 2: Single-member funds – Comparison of member and trustee requirements for individual and corporate trustees

    Structure

    Features

    Individual trustees

    • There must be two trustees.
    • One trustee must be a fund member.
    • If the fund member is an employee of the other trustee, the fund member and the other trustee must be relatives.

    Corporate trustee

    • The corporate trustee company can have one or two directors, but no more.
    • The fund member must be the sole director or one of the two directors.
    • If there are two directors and the fund member is an employee of the other director, the fund member and the other director must be relatives.

    Cost

    Table 3: Comparison of the costs associated with individual and corporate trustees

    Structure

    Features

    Individual trustees

    Corporate trustee

    • ASIC charges a fee to register a corporate trustee for the first time.
    • There is an annual review fee, which is lower if the corporate trustee acts solely as a super fund trustee, but higher if the corporate trustee also performs another function, such as running a business.
    • A corporate trustee cannot be paid for its services as a trustee, and directors of the corporate trustee cannot be paid for their duties or services as directors in relation to the fund.

    Ownership of fund assets

    The title of fund assets must be in the name of the current trustees 'as trustees for' the fund.

    Table 4: Comparison of ownership of fund assets for individual and corporate trustees

    Structure

    Features

    Individual trustees

    • If an individual trustee is removed or another added, you must change the titles of the SMSF's assets. This can be costly and time-consuming.
    • State government authorities may charge a fee for title changes.
    • Most financial institutions also charge a fee for title changes.

    Corporate trustee

    • Recording and registering assets can be simpler, particularly for changes in membership.
    • When a person starts or stops being a member of the SMSF, they become, or cease to be, a director of the corporate trustee.
    • You must notify us, and ASIC of any change in director.
    • The corporate trustee doesn't change, so the titles of the SMSF’s assets are unchanged.

    Separation of assets

    The fund's assets must be kept separate from any assets members hold personally.

    Table 5: Comparison of the separation of assets for individual and corporate trustees

    Structure

    Features

    Individual trustees

    • Fund assets must be in the fund's name
    • Fund assets must not be combined with personal assets.

    Corporate trustee

    • Fund assets must be in the fund's name.
    • Fund assets must not be combined with director's personal assets.
    • Companies have limited liability, so a corporate trustee offers greater protection if the trustee is sued for damages.

    Penalties

    Table 6: Comparison of penalties for individual and corporate trustees

    Structure

    Features

    Individual trustees

    • If super laws are breached, administrative penalties are levied on each trustee.
    • For example, for failing to prepare financial accounts and statements, each trustee is liable for a $2,100 penalty (10 penalty units). This would amount to $8,400 if there were four trustees.
    • The value of a penalty unit is $210.

    Corporate trustee

    • If super laws are breached, administrative penalties are levied on the corporate trustee.
    • For example, for failing to prepare financial accounts and statements, a corporate trustee would be liable for a $2,100 penalty (10 penalty units).
    • The value of a penalty unit is $210.

    Succession

    Table 7: Comparison of succession for individual and corporate trustees

    Structure

    Features

    Individual trustees

    • Where changes in trustees occur, the fund is not likely to continue to operate as usual unless an appropriate succession plan has been prepared.

    Corporate trustee

    • A corporate trustee continues in the event of a member's death.
    • In the event of the death or incapacity of a member, control of an SMSF and its assets by a corporate trustee is more certain.

    Next step:

    See also:

    Last modified: 16 Feb 2018QC 23310