Who can you appoint as a Trustee?
You can appoint either Individuals as SMSF Trustees or a Company as a Trustee. Each is discussed in turn:
Option 1: Individual Trustees
It is a legislative requirement that where a SMSF has individual Trustees, it must have a Minimum of 2 Individual Trustees and a Maximum of 4 Individual Trustees. The Individual Trustees will be responsible for running the SMSF. Almost anyone over 18 can be a Trustee of a SMSF including a spouse, adult child or friends. It is FREE to appoint Individual Trustees for a SMSF.
Option 2: Company Trustee
Alternatively you may select a Company to act as a Trustee for your SMSF. In this case the Members of the SMSF will need to be Directors of the Company Trustee. The Directors of the Company Trustee will be responsible for running the SMSF. The cost of establishing a Company is $799 which also covers the establishment fee payable to ASIC. In addition there is an additional annual ASIC Fee of approximately $44.
Corporate vs. Individual Trustee?
Because SMSF’s are trusts they must have a trustee. The trustee is the controller of the trust. You must have either individual trustees or a company that acts as the trustee of the SMSF. All assets of the SMSF are purchased in the name of the trustees. If the trustees are individuals, every individual must be listed as the owner. Alternatively a company trustee is listed as the legal owner.
We all know that people die or get divorced, what is not understood is that any change to the SMSF trustees must be reflected in the holdings of all assets. Therefore when an individual dies or leaves the SMSF due to divorce or other reason, every asset residing in the SMSF must have its name changed. In most cases it is a time consuming, frustrating job and the timing is never ideal. At the worst possible time, you will be asked to make changes to your SMSF when you have other priorities. Extra fees will be applicable and that is the last thing you need.
By law if it’s just you and no one else can become an individual trustee you must have a corporate trustee. If you are considering purchasing Property with Borrowings in your SMSF then your Lender may lend more to your SMSF, if you have a Company as the SMSF Trustee. Lenders may not lend at all if your SMSF does not have a corporate trustee.
Corporate trustees are more expensive to establish and carry a $44 dollar ASIC fee each year, but this cost can be completely offset by savings at a later date. Because we feel so strongly that SMSF’s should have corporate trustees our fee is $799 which is just enough to cover the ASIC fee and postage and handling. With free SMSF establishment and our “at cost” corporate trustee establishment fee, there is no cost impediment to commencing an SMSF with a corporate trustee.
The company that you establish does not have to report its activity, its only function is to be an SMSF trustee. Supervision does have a corporate secretarial service that can deal with the payment of the annual fee or changes to addresses of $220/annum but that is an optional extra if you need it.