Why having a corporate trustee for your SMSF can save you from potential costs
Some of the key advantages of having a corporate trustee include:
Continuous succession – a company has an indefinite life span. A company makes succession to control more certain on death or incapacity.
Administrative efficiency – on the admission or cessation of membership, that person becomes or ceases to be a director of the company. Thus, the title to all assets remains in the trustee company’s name. The situation is vastly different with individual trustees. Each admission or exit of a member, who is also a trustee, involves considerable time and paperwork.
Sole member SMSF’s – you can have an SMSF where one individual is both the sole member and the sole director of the Trustee company; as opposed to sole member funds with individual trustees where you must have two individual trustees.
Greater asset protection – as companies have limited liability, they provide greater protection. The advantages of limited liabilities should never be underestimated.
Administrative penalties – there are a number of penalties that can be readily be imposed under s 166 of the Commonwealth Superannuation Industry (Supervision) Act 1993 by the ATO where no questions are asked. Each individual trustee is subject to a penalty of up to $18,000 per offence. In comparison, a company is only liable to one penalty amount per office.
Advisors should encourage clients to move to corporate trustees
Key steps involved with changing an SMSF trustee
- A careful review of the prior document trail – preferably each prior deed and deed of change of trustee is carefully reviewed to determine what are the most appropriate provisions that apply to changing the trustee.
- A review of applicable legislation such as the Trustee Act and stamp duty legislation of the relevant jurisdiction. In some cases the SMSF deed does not contain adequate power and a resort to the provisions in the Trustee Act of the relevant jurisdiction is required.
- In cases where the deed is out of date and does not have clear power to undertake a change of trustee, updating the deed first is advisable to ensure there is clear and appropriate power.
- Ensure that the SMSF deed have an appropriate ‘appointor’ power as the ability to appoint and remove trustees is one of the most important powers that can be exercised in relation to controlling an SMSF.
We advise our SMSF clients who currently have individual trustees to consider switching to a corporate trustee as soon as practicable, as not having a corporate trustee may result in costly disputes. We advise clients to seek advice on this from experienced advisers or solicitors specialising in this area.
If you would like more information how you can go about changing your SMSF from an individual trustee into a corporate trustee, please contact us on 02 9954 3843.
‘Getting your clients on board with having a corporate trustee’ SMSF Adviser Magazine written by Daniel Butler (March 2016): 10-11. Print