– by Dave Kang
SMSF Trustees Individual or Corporate?
When setting up a Self Managed Super Fund (SMSF), it is crucial to consider the advantages and disadvantages of using a corporate trustee instead of an individual trustee. A SMSF may have up to four individual trustees or one corporate trustee.
Corporate Trustee – Benefits:
There are many benefits to having a corporate trustee.
A corporate trustee makes the upfront cost of establishing a company worthwhile.
The ATO recommends considering four key factors when deciding whether to appoint an individual or corporate trustee:
2. Administration of fund assets
3. Separation of assets between members and the fund
Setting up a corporate trustee means the upfront costs will be higher than appointing an individual trustee, and there will also be a yearly annual company fee to ASIC. However this may prove worthwhile in the long run because of the benefits of having a corporate trustee.
A separate corporate trustee reduces the risk that SMSF assets will be intermingled with member assets, and also provides much greater protection in the form of limited liability, if a trustee is sued. An individual trustee could have their personal assets outside of the fund pursued to satisfy a claim while a claim against a corporate trustee is limited to the assets contained within the fund.
A corporate trustee also allows for much greater certainty in succession planning. If an individual trustee is removed from the SMSF, then the title to all of the assets has to be changed as well. This process can be both costly and time-consuming. However with a corporate trustee, if an individual wishes to leave the SMSF then the directors of the company can be changed relatively simply. A corporate trustee arrangement is also generally required by banks if your SMSF is considering purchasing property.
Despite the initial upfront costs associated with setting up a corporate trustee for your SMSF, the benefits over the long run can often make it worthwhile.
This is particularly true for funds where members are likely to change in the future.
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Photo Credit: Jinx! – Day 103- What to Get….