Should I Have a Corporate or Individual Trustee for My SMSF?
When establishing a Self-Managed Super Fund (SMSF), one of the most important decisions you’ll face is whether to opt for a corporate trustee or individual trustees. Each option has its own set of advantages and disadvantages, and understanding these can help you make an informed choice that aligns with your long-term goals.
The Corporate Trustee Structure
A corporate trustee involves setting up a company to act as the trustee of your SMSF. While this option may come with higher initial setup costs, it offers several key benefits:
Advantages of a Corporate Trustee
- Continuous Succession: A corporate trustee has an indefinite lifespan, ensuring seamless continuity even when members join or leave the fund. This is particularly beneficial for estate planning and maintaining the fund’s operations.
- Administrative Efficiency: Adding or removing members is straightforward, as it only requires changing the company’s directors. This process is more efficient than transferring ownership of fund assets, which is necessary with individual trustees.
- Asset Protection: Companies provide limited liability, which can protect personal assets from legal actions against the trustee.
- Simplified Borrowing Arrangements: Lenders often prefer corporate trustees for limited recourse borrowing arrangements (LRBAs), making the borrowing process smoother.
- Lower Penalties: Under the administrative penalty regime, a corporate trustee typically faces a single penalty for contraventions, whereas individual trustees may incur separate penalties for each trustee.
The Individual Trustee Structure
Choosing individual trustees may seem simpler and less costly initially, but it comes with its own set of challenges:
Considerations for Individual Trustees
- Lower Initial Costs: Individual trustees avoid the upfront costs associated with establishing a company and ongoing ASIC fees.
- Simpler Setup: The process of setting up individual trustees involves less paperwork at the outset.
- Potential Complications: As circumstances change, individual trustees may face more administrative burdens and costs, especially when it comes to succession planning and compliance.
Making the Right Choice
The decision between a corporate and individual trustee structure should be based on your specific circumstances, including your fund’s size, complexity, and long-term goals. Our team of experts can provide tailored advice, helping you understand the pros and cons of each option. We can guide you through the setup process, ensuring compliance with all relevant regulations while saving you time and effort. Plus, our services are competitively priced, making professional assistance accessible.
