As with other aspects of Self Managed Super Funds there are rules around who can be a Trustee or Director of your SMSF. This article explains some of those Trustee rules.
An SMSF can have no more than 4 members at any one time and are generally, though not always, members of the same family. A member cannot be an employee of another member unless they are related.
An SMSF is in essence just a trust and like any trust is run by the trustees. There are two SMSF trustee structures, one where the trustees work in their individual capacity and another where a company is appointed as the trustee.
Note: SMSFs are not appropriate for all investors due to the time, cost and responsibility involved in managing and SMSF and because they are not cost competitive for lower account balances.
In both cases, it is the members who run the fund and as a general rule, all members are either trustees themselves or directors of the corporate trustee. Also, it is only the members who run the SMSF and as such, all individual trustees or directors of the corporate trustee must generally be members of the fund.
Trustees cannot be paid for carrying out their trustee duties.
Certain people cannot act as an individual trustee or a director of a corporate trustee of a super fund including someone who:
has been convicted of an offence involving dishonest conduct
has been subject to a civil penalty under the superannuation legislation
is insolvent or under administration (an undischarged bankrupt)
who has been disqualified from acting as a trustee of a superannuation fund by the ATO.
There are a number of differences between the two SMSF trustee structures and it is important to choose the one most appropriate during the establishment of the SMSF as it can be quite difficult to change later on. A corporate trustee structure is the most appropriate for the majority of SMSFs though the table below should assist you in determining which is the most appropriate in your circumstances.
Change of | Where a new member is admitted to a fund or a member departs including through death, there can be significantly more administration involved where there are individual trustees. This is due to the requirement that all trustees are members and where there are individual trustees, all assets should be in the name of all trustees. For corporate trustees, the assets are held in the name of the company and no change in ownership occurs when a member joins or leaves. |
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Single member | With individual trustees, a single member fund is only allowed where there is a second trustee who is not a member. However with a corporate trustee it is not necessary to involve a second person, though it is permitted. |
Costs | There are slightly increased establishment costs with a corporate trustee due to the additional requirement to register a company. In addition, the company incurs an annual fee payable to ASIC though this fee is quite low when the company only acts as trustee of the SMSF. |
Ownership of | As the assets are held in the name of the company when using a corporate trustee, there can be no mistake or dispute over whether an asset belongs to the fund or to the individual. However, where the company is used for other purposes there can be confusion over which assets belong to the SMSF and therefore, it is generally better to establish a new company solely to operate as the SMSF Trustee. |
Trustee obligations | All trustees are obligated to abide by the fund’s trust deed and the superannuation laws. However, directors of corporate trustees will also have to comply with the company’s constitution and the laws applying to companies. |
