Setting up a new SMSF does involve some cost, and one of the decisions you'll need to make is whether it's worth paying to establish a new company to act as trustee. The alternative option of appointing the members as individual trustees is initially cheaper, but this may have downsides in the long run.
A key benefit of having a corporate SMSF trustee is that recording ownership of assets like shares and property is easier. The ATO strictly requires that SMSF assets must be held in the name of the trustee(s). If an SMSF has individual trustees, every member will need to be a trustee and the title to all assets will need to be recorded in all of the members' names. This means that each time a member joins or leaves the fund (eg following a death, divorce or admission of an extra member such as an adult child), the title to all SMSF assets must be updated.
On the other hand, if the SMSF has a corporate trustee, the directors of that company will change, but the company itself will simply continue to hold title to the fund assets.
A change in members and therefore individual trustees also creates more internal paperwork for the fund. To remove or appoint an individual trustee, SMSFs generally need to have formal "change of trustee" documents prepared. This is usually more expensive and complicated than the process of appointing or removing a company director.
Another great advantage of a corporate SMSF trustee is that it makes it easier to comply with the legal requirement to keep the assets of the SMSF separate from any assets the members own personally.
Having a corporate trustee makes it easier for everyone – the members, their advisers, the fund's auditor and even the ATO – to identify which assets belong to the fund. And the risk of any confusion is reduced even further when you use a new company that has been set up to act solely as trustee of the SMSF (rather than re-using another company you already own, eg the corporate trustee of your family trust).
Corporate trustees are also beneficial for single-member SMSFs. The sole member can be the sole director of the trustee company and exercise full control over the fund. However, if the fund is set up with individual trustees, by law the member must find a second individual to act as a co-trustee. This issue becomes very relevant for many two-member SMSFs when one spouse dies and leaves the surviving spouse as sole member of the fund; for many couples, having a corporate trustee that continues in place is a huge benefit and avoids the need for the grieving spouse to find and appoint another individual trustee.
So, what are the costs?
Setting up a company entails the following costs:
- Initial establishment costs, including ASIC's registration fee. Talk to our office about company set-up services to assist you with this process.
- Ongoing annual fees payable to ASIC. This is usually $263 for most companies, but if you establish the company as a "special purpose" superannuation trustee company, you pay a reduced annual ASIC fee of $53.
Thinking about an SMSF structure?
If you're planning to set up a new SMSF, or are thinking of switching your existing SMSF to a corporate trustee structure, talk to us for expert advice and guidance. We can help you evaluate your trustee structuring options, handle the necessary documentation and company registration, and provide full support on all aspects of establishing and running your SMSF.