A Corporate Trustee is when you have a Company as the Trustee of your SMSF. This is a ‘Special Purpose Company’ as its only purpose is to act as Trustee of a SMSF.
Around 80% of SMSF’s set up are Individual Trustees, per the ATO statistics. The reason for this is it is simpler and more cost efficient to use Individual Trustees rather than a Corporate Trustee. The default option Superannuation Warehouse uses is to establish new SMSF’s with Individual Trustees. There is adequote statutory protection of a SMSF so there is no pressing need to interpose yet another entity for asset protection purposes.
Superannuation Warehouse can set up a Corporate Trustee if you prefer this. The major disadvantage of a Corporate Trustee is the up-front cost of establishing the Company. The pros and cons are set out below.
Advantages of using a Corporate Trustee
- If there’s only one Trustee, use this structure as you do not have to involve another individual as Trustee
- When Trustees change, you can change Directors in the Company only and do not have to change the Trust Deed for the Trustees (although the Trust Deed might still need amended for a change in Beneficiaries)
Disadvantages of using a Corporate Trustee
- Higher set-up fees
- There is an annual $41 fee payable for maintenance of this entity which is payable to ASIC (you can pay this from the SMSF)
- No extra protection offered to the SMSF assets due to this extra legal structure
Changing from Individual to a Corporate Trustee
It is fairly straightforward to change Trustees without affecting the SMSF. You can go from Individual Trustees to a Corporate Trustee and visa versa. When purchasing property, the banks may require a Corporate Trustee.
To execute a change of Trustee to a corporate Trustee, you will need to complete a Minutes Change of Trustee as well as a Trustee Consent. The new Trustees will also need to sign a new Trustee Declaration in their capacity as Trustee of the corporate entity (click on the links to download these documents).
Apart from the initial set-up fees, Superannuation Warehouse does not charge a fee to maintain the Corporate Trustee. This is all included in the fixed annual fee. Superannuation Warehouse will also be appointed as tax agent for the Corporate Trustee and prepare the annual return documents.
Single Member Funds
Single member SMSF’s with a Corporate Trustee allows the sole Member to be the only Director of the Company and have full control over the running of the SMSF. If the SMSF had Individual Trustees it would be necessary for another individual to act as the second Trustee and assist in the running of the SMSF.
Lastly, if you want to add property to your SMSF later on, you need a Corporate Trustee for that structure. The Corporate Trustee for the Bare Trust can not be the same as the Corporate Trustee as for the SMSF. So a Corporate Trustee will have no benefit in a property limited recourse borrowing arrangement.