What Are The Advantages Of A SMSF Corporate Trustee

A company has an indefinite life span and cannot ‘die’. Therefore, a corporate trustee can ensure control of an SMSF is more certain in the circumstances of the death or incapacity of a member.

If a SMSF has individual trustees (eg Mum and Dad) timely action must be taken on the death of a member to ensure the trustee/member rules are satisfied. SMSF rules do not allow for a sole individual trustee/member of the SMSF, so if Mum or Dad die, the surviving spouse must appoint a co-trustee.

When members are admitted to or cease membership of the SMSF, all that is required is that the person becomes, or ceases to be, a director of the corporate trustee. The corporate trustee does not change as a result. Therefore, title to the SMSF’s assets remains in the name of the corporate trustee.

To introduce a new member to an SMSF with individual trustees requires that person to become a trustee. As trust assets must be held in the names of the trustees, this will require the title to all assets to be transferred to the new trustees when a member is admitted to or exits the fund.

A SMSF with a corporate trustee can pay benefits either as pensions or as lump sums.

The SMSF rules require that a lump sum can only be paid by surrendering a pension entitlement or commuting a pension, which gives rise to extra paperwork . You cannot simply pay a lump sum benefit.

A corporate trustee ensures greater flexibility for estate planning, as the trustee does not change as a result of the death of a member. A director can also have greater control over their succession plans by passing on their shares in the corporate trustee.

The death of a member requires there to be a change of trustee, and this gives rise to considerable administrative work and costs at an inopportune time.

As companies are subject to limited liability, a corporate trustee will provide greater protection where a party sues the trustee for damages.

If an individual trustee suffers any liability, the trustee’s personal assets may be exposed.

You can have an SMSF where one individual is both the sole member and the sole director

A sole member SMSF must have two individual trustees.

The administrative penalty regime that commences from 1 July 2014 typically only applies to a company once for each contravention.

A penalty can be imposed from 1 July 2014 on each individual trustee for each contravention. Thus, having two individual trustees can double the administrative penalty that would otherwise apply to a corporate trustee.

It is easier to evidence that the central management and control (‘CMC’) of a corporate trustee remains in Australia.

An SMSF with individual trustees would generally have greater difficulty showing its CMC remained in Australia.