Self Managed Super Funds – Having a Company as a Trustee
Should I have a company as trustee of my Self Managed Super Fund?
When a new Self Managed Super Fund (”Selfie” – the technical legal name!) is established, the members have two choices:-
- Do we, as the proposed members, act as individual trustees for a “Selfie”, or
- Do we set up a company to act as the trustee of our “Selfie”.
It is no surprise that most people choose to do it personally as the choice of a company comes at a small additional fee.
Research indicates that approximately 70% of “Selfies” have individual trustees.
But is this the best choice?
There are innumerable advantages in having a company as trustee and it seems that these advantages are not always apparent when a trust is first set up.
To illustrate the issues, assume Brian and Penny have decided to set up a “Selfie”. The members of the “Selfie” will be Brian and Penny.
If they choose to have individual trustees of their “Selfie” then the trustees of the “Selfie” must be Brian and Penny.
If they choose to have a company as trustee, then the directors of that company must be Brian and Penny.
What are some of the advantages of having a company as trustee of my “Selfie”?
Having a corporate trustee is a very efficient way to hold the assets of the “Selfie”. If Brian and Penny decide to add another member to their “Selfie” there is no need to change the ownership of the assets in the fund. The new member is simply added as a director of the trustee company. Similarly, if either Brian or Penny decide not to be a member of the “Selfie” then they are simply removed as a director of the company that acts as trustee for the “Selfie”.
Sole Member “Selfie”
If there is a corporate trustee you can have one individual who is both the sole member of the “Selfie” AND the sole director of the company that is trustee of the “Selfie”.
If there are individual trustees the sole member must find another person who is willing to act as an individual trustee of the “Selfie” as there must be at least two individual trustees. In practice, it may be hard to find a willing volunteer to assume this job as that person assumes certain responsibilities and can potentially be liable if the ‘Selfie” does not strictly comply with its legal obligations.
Better Estate Planning
A corporate trustee allows smoother and easier succession on the death of a member, as the corporate trustee does not have to be changed.
In the case of individual trustees, the death of a member gives rise to considerable work and costs. The trustees of the trust will have to be changed and it will be necessary to change the ownership of all of the assets of the “Selfie” and it also may be necessary to appoint additional individuals as trustees.
The situation is similar where a member of the fund does not die but becomes mentally incapacitated. Having a corporate trustee means that there only needs to be a replacement director appointed to look after the interests of the incapacitated member.
- Clearer Identification of the Assets in the “Selfie”
When individuals are trustees of their own “Selfie” it is sometimes not clear which assets are part of the “Selfie”, and are the investments of that fund, and which assets are the personal assets of the individuals.
Where there is a company which is the trustee of the “Selfie” all assets are held in the name of that company and there is a very clear delineation between the personal assets of the members and the assets of the “Selfie”.
Can a corporate trustee be appointed to an existing “Selfie” with individual trustees?
Yes, it can. At Tetlow Legal we regularly advise clients on how to replace individual trustees of a self managed super fund with a corporate trustee.
For more information regarding Self Managed Super Funds, see our other articles by clicking on these links; Self Managed Super Funds – Part 1: Do it Yourself Super and
For more information regarding Self Managed Super Funds, see our other articles by clicking on these links; Self Managed Super Funds: Do it Yourself Super and Self Managed Super Funds: Having a Company as a Trustee.
If you would like any further advice on the use of a company as trustee for your new or existing “Selfie” please contact us on 6140 3263 or email Brian Tetlow or Emma Bragg at [email protected].