Setting up a self managed super fund with a corporate trustee will mean higher establishment costs due to the costs associated with setting up a new company.
Despite the higher establishment cost, it is widely accepted that a sole-purpose corporate SMSF trustee is a superior structure, as the company exist only for the purpose of acting as trustee of a SMSF.
The sole-purpose SMSF trustee company does not trade in its own right, and is not required to lodge tax return. The trustee company is also eligible for a reduced ASIC annual fee.
Reasons include:
single member fund - a single member SMSF with a corporate trustee can be established and operate without the involvement of any other person. That sole member of the SMSF will be the sole director of the corporate trustee.
perpetual succession - a company cannot die, so it enables better control in the event of member death or incapacity.
greater administrative efficiency - over time, membership to the SMSF may change – new member may find their way into the SMSF and existing member out of the SMSF.
It is necessary for a member to also be a trustee. Superannuation law requires the assets of the SMSF be held in the name of the trustee. A change in trustee would require the legal title of the assets to be changed as the assets must be held in the names of all the trustees on behalf of the SMSF (such as having to update ownership of assets). The trustees must notify all relevant account providers and registers of the change, such as bank, share registry, etc. In some instances, this will necessitate the closure of existing account and re-opening of new account.
In comparison to a corporate trustee – where there is a change in membership, the corporate trustee will not change and only the directorship will change. Therefore, there is no change in legal title of assets with corporate trustee.
reduced risk of accidental intermingling of SMSF and personal assets - trustees are required to keep the assets of the SMSF separate from their own assets. With a sole-purpose corporate trustee, it is much simpler and easier to manage this requirement as it provides clear separation of assets.
death of a member - an SMSF with individual trustees must have at least 2 trustees. If a member dies, the remaining person cannot be the sole trustee. Corporate trustee structure allows for a sole member of a SMSF to be the sole director of the company and meet the SMSF definition.
