20 Jan SMSF’s with corporate trustees favoured by the ATO
Whether your self-managed super fund (SMSF) is to have individual trustees or a corporate trustee is one of the first questions to be answered when setting up your SMSF. The ATO however has come out to publicly favour corporate trustee structures over SMSF’s structured with individual trustees.
An individual trustee structure may initially be better suited to those who are cost conscious, as it is typically less expensive to establish a SMSF with individual trustees. Setting up a SMSF with individual trustees is usually simpler and cheaper as there is no additional establishment costs such as the setup of a company trustee, no ongoing annual fees with ASIC and members are not required to understand and follow corporation law requirements.
While the use of individual trustees may remove the additional costs of setting up and maintaining a corporate trustee, the initial savings may be outweighed if circumstances in the SMSF change. Difficulties can arise in various situations including where one member dies, where members experience a marriage breakdown, where a member leaves the fund, or where an additional member joins the fund. This is where the benefits of a corporate trustee structure may offer a better suited alternative.
Members listed under a corporate structure must all be directors of the company, which means that should a member be removed; the documentation to be changed lies within the company register. Whereas SMSF’s with individual trustee structures would need to change ownership documentation; attracting fees.
ATO penalties are less for corporate trustees as SMSF’s incur penalties per trustee. This means that SMSF’s with multiple individual trustees would incur multiple penalties.
If the SMSF is only to have one member; individual trustee structures would require 2 trustees; compared to a corporate trustee requiring only the company with one sole director.
Asset separation is made simpler with corporate trustees as risk of personal assets being confused with fund assets are greatly reduced.
Further to this, corporate trustees have limited liabilities; providing greater protection should the trustee be sued for damages.