SMSFs: Corporate or Individual Trustees? What you need to know
October 17th, 2012 | Self Managed Superannuation, Financial Planning, Investment Advice.
Do you have a Self Managed Superannuation Fund or are you considering establishing one? If the answer to either of these questions is yes you should consider having a corporate trustee for your self managed super fund.
Asset protection and risk minimisation
The primary reason for a corporate trustee is to provide a clear separation of superannuation assets from personal assets. This is essential when you find yourself in difficult financial times.
In most cases the assets of a self managed super fund are not available to your creditors so it’s important to clearly define which assets belong to you personally, and which assets belong to your self managed super fund. For example, if you and your wife are individual trustees of your super fund, your invest $100,000 in listed shares and bankruptcy occurs some time thereafter, the trustee needs to determine whether these shares are owned by you and your wife, or by you and your wife as trustee for your super fund.
Similarly, if you operate a business from a company, the corporate trustee should not be the trading company, rather it should be a non-trading trustee company (for the same reasons outlined above).
The administrative task of introducing a new member, or if a member dies or leaves the fund, is far simpler if the trustee is a company. The change of trustee process revolves around documenting the change of director and various forms in relation to the SMSF – a relatively simple, cheap and quick process. In comparison, when changing individual trustees, changes are required to be made to each individual asset of the fund. This can result in a time consuming and expensive process.
Another advantage of a corporate trustee is that a single member fund can have that member as the sole director of the SMSF, whereas with individual trustees, there must be two individuals acting as trustee of a single member fund. A corporate trustee therefore has the advantage of not having to consult with anyone else to make decisions and sign off on compliance documents.
Set up costs
The initial set up costs are higher if you choose to go down the corporate trustee route. But don’t let this put you off – it is important to outweigh the overall advantages and disadvantages of each option. Your financial planner will be able to outline the costs involved for either and help you determine the best option to suit you.
Here at The Quinn Group our experienced team of Financial Planners, Accountants and Lawyers can assist you with all your superannuation needs. For more advice about SMSF trustees, contact Peter Quinn by submitting an online enquiry or calling us on +61 2 9580 9166 to book an obligation free appointment.
The information in this document does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. It is important that your personal circumstances are taken into account before making any financial decision and it is recommended that you seek assistance from your financial adviser.