Corporate Trusteeship means having a Company rather than an individual as the Trustee of your SMSF. This type of Company is known as a ‘Special Purpose Company’ because its only purpose is to act as a Trustee of an SMSF.
According to ATO statistics, the Trustees of around 80% of all SMSFs are individuals. Superannuation Warehouse’s default position is to establish new SMSFs with Individual Trustees.
This being said, Superannuation Warehouse can set up your SMSF with a Corporate Trustee if you wish. The major disadvantage of a Corporate Trustee is the upfront cost of establishing the Company. Further pros and cons are set out below.
Advantages of using a Corporate Trustee
- If there’s only one Trustee, (i.e. no individual Trustees are involved), use the Corporate Trustee structure
- If there is a change of Trustee you are obliged only to change Directors in the Company. You don’t have to change the Trust Deed for the Trustees (although the Trust Deed may still have to be amended if the Beneficiaries change)
Disadvantages of using a Corporate Trustee
- Higher set-up fees
- There is an annual fee of $48 (was $47 in 2017) payable to ASIC for maintenance of this entity (you can pay this from the SMSF)
- Due to this extra legal structure, no extra protection is offered to SMSF assets
For an interesting recent article regarding the use of a Corporate Trustee versus Individual Trustees, please click on the button below:
Changing from Individual to a Corporate Trustee
It is relatively straightforward to change Trustees without affecting the SMSF. You can go from Individual Trustees to a Corporate Trustee and vice versa. When purchasing property, the banks may require a Corporate Trustee.
To execute a change in Trusteeship from Individual to Corporate, you must complete a Minutes Change of Trustee as well as a Trustee Consent. The new Trustees will also need to sign a new Trustee Declaration in their capacity as Trustees of a corporate entity (click on the links to download these documents).
Apart from the initial set-up fees, Superannuation Warehouse does not charge a fee to maintain the Corporate Trustee. This is included in the fixed annual fee. Superannuation Warehouse will also be appointed as tax agent for the Corporate Trustee and prepare the annual return documents.
The ASIC annual review fee (fee payable to ASIC) for the Corporate Trustee increases to $48 from 1 July 2017. For details of the ASIC fee changed from 1 July 2017, please see here.
Single Member Funds
A single member SMSF with a Corporate Trustee allows the sole Member to be the only Director of the Company and have full control over the running of the SMSF. If the SMSF had Individual Trustees, another individual would be required to act as a second Trustee and assist in the running of the SMSF.
Lastly, you need a Corporate Trustee structure if you want to add property to your SMSF later on. The Corporate Trustee of a Bare Trust cannot also be the Corporate Trustee of an SMSF.
An operating company can be used as a Corporate Trustee as long as the Directors of the company are also the Members of the Fund and Members are also the Directors of the company. However, there are some risks associated with doing so. If the operating company is liquidated, its position as a Trustee of the Fund could be compromised. Therefore, it is prudent to set up a Corporate Trustee Fund with a special purpose company whose sole purpose is to act as a Trustee of the Fund. No transacions takes place in a special purpose company.
It is up to the Trustees whether or not to set up a Fund with a Corporate Trustee. Most of the Funds that we set up are Individual Trustee Funds. As per the article above, the Tax Office’s record shows that 93% of all Self Managed Super Funds are Individual Trustee Funds. If required, Trustees can convert their Individual Trustee Fund into a Corporate Trustee Fund by setting up a company to act as the Trustee of the Fund. One scenario which might require a Corporate Trustee to be in place is when the SMSF acquires a loan from a bank in order to invest in properties. For more information on investing in a property with loans, please see here.