SMSF Corporate Trustee vs Individual Trustee

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What are the matters that need to be considered when setting up your trustee for your self managed superannuation fund (“SMSF”)?  Below we consider the advantages and disadvantages of using a corporate trustee as opposed to an individual trustee.

Corporate Trustee – Advantages

  1. A single member SMSF can operate  with the member being the sole director and member of the SMSF
  2. With a corporate trustee and a  two member fund, if one member dies the surviving member can continue as sole director and member.
  3. If a need arises to change the directors of the corporate trustee there is no need to change the ownership documents relating to the SMSF’s assets.
  4. A corporate trustee is subject to limited liability and may provide greater protection for its members’ personal assets.
  5. If a SMSF wishes to borrow most lenders will insist on the SMSF having a corporate trustee.

Corporate Trustee – Disadvantages

  1. Corporate trustees are more costly to establish
  2. Corporate trustees are subject to the Corporations Act and are required to provide financial statements although you can choose to have a special purpose company (a company that has the sole function of being trustee of the SMSF) which is not required to prepare financial statements.  The annual ASIC fees for special purpose companies are also less.
  3. Where you are not using a special purposes company and your company acts in multiple capacities (e.g. acting as a trustee for the SMSF as well as running a business) if the business goes into receivership or liquidation, creditors may sue the company if the assets of the SMSF appear as the company’s assets.  Convincing liquidators and creditors that an asset is held as part of an SMSF can be time-consuming and expensive unless the company is a special purpose company.

Individual Trustees – Advantages

  1. Individual trustees are less costly to establish and run.

Individual Trustees – Disadvantages

  1. To be a single member SMSF there must be a minimum of two trustees ie, the member plus one other to act as trustee.
  2. With a two member/trustee SMSF if one dies the surviving member will not be able to continue as sole trustee and sole member.  Another individual would need to be appointed as the second trustee.
  3. All assets must be held in the names of all individual trustees as trustees for the SMSF If there is a change in individual trustees, the ownership documents of the assets need to be transferred incurring legal and other costs to effect the transfer.
  4. In most states there is also some legal uncertainty if any change in trustee needs to be registered with the Stamp Duty’s office.
  5. In most Australian states and territories, only legal ownership of real estate can be recorded with the titles office.  This means, individual trustees are typically registered with the titles office in the same way they would be registered if they owned the land personally.  Therefore, where an individual becomes a bankrupt, creditors may attempt to gain access to the property.  The individual will have to prove the property held in their name is actually held in their capacity as a trustee and therefore it is off limits to creditors.  Proving this can be a difficult and time-consuming process.
  6. An individual who acts as trustee exposes their personal assets to risk if they incur any liability as trustee of an SMSF.  For example, if the SMSF owns a property and a personal injury claim is made against the owner of the property, then all assets of the individual owner are potentially at risk to meet that claim.


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