One of the most basic issues to be considered by trustees of SMSFs (and also by those about to establish an SMSF) is whether it is more appropriate for the SMSF to have individual or a corporate trustee.
Additional expenses are involved for a corporate trustee, such as initial establishment costs for a new company, as well as annual ASIC lodgement fees. There are also generally additional administrative and lodging requirements for a corporate trustee.
Nevertheless, there are several reasons why a corporate trustee may be more appropriate for an SMSF than individual trustees. These reasons can be summarised as follows:
It is possible for the sole member of an SMSF to also be the sole director of a corporate trustee. However, a sole member SMSF cannot have a sole individual trustee – if there are to be individual trustees, there must also be a second individual trustee of the SMSF, in addition to the member/trustee.
Where there are individual trustees, any change of trustee may require all the assets of the SMSF to be transferred into the names of the remaining or new trustees.
However, where there is a corporate trustee, any change to the directors of that corporate trustee will not require any transferring of the assets of the SMSF.
A SMSF with a corporate trustee is able (subject to the preservation rules) to pay benefits either by way of pension or as a lump sum.
A SMSF with a corporate trustee also provides greater protection from liability in the event that the trustee of the SMSF is ever sued (eg in the event that a third party is injured on property owned by the SMSF).
Finally, it is generally more appropriate for a SMSF to have a sole purpose SMSF corporate trustee, so that the trustee never has to establish which assets it holds in its capacity as trustee of the SMSF (which could be costly and time-consuming). Also, a reduced annual ASIC fee applies for sole purpose SMSF trustees.
Except taken from NTAA’s Semi-Circular Issue 10
