Self Managed Super Funds - The Basics

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A Self Managed Super Fund (“SMSF”) can have no more than four members at any one time. 

Essentially, an SMSF is a trust, and as with all trusts, it is managed by its trustee(s). 

The trustee(s) run the SMSF for the benefit of its members. 

An SMSF can have trustees who act in their individual capacity or the SMSF can have a company to act as trustee of the fund. 

If the SMSF has individual trustees, each member of the SMSF must be a trustee, and each trustee must be a member of the fund.  A member cannot be an employee of another member, unless they are relatives. 

If the SMSF has a corporate trustee, each member of the fund must be a director of the corporate trustee, and each director of the corporate trustee must be a member of the fund.  A member cannot be an employee of another member, unless they are relatives. 

Below is a table which sets out the requirements for a single-member SMSF.

Individual trustees

Corporate trustee

There must be two trustees.

The corporate trustee can have one or two directors, but no more.

One trustee must be a fund member.

The fund member must be the sole director or one of the two directors.

If the fund member is an employee of the other trustee, the fund member and the other trustee must be relatives.

If there are two directors and the fund member is an employee of the other director, the fund member and the other director must be relatives.

Individual trustees or Corporate trustees?

Clelands Lawyers Adelaide generally recommend that a company be utilised to act as the trustee of an SMSF. 

With a corporate trustee, the assets of the SMSF are held in the name of the trustee company, and there is no change of ownership of the assets of the fund when a member joins or leaves the SMSF.  On the other hand, if there are individual trustees and a member joins or leaves the SMSF, asset registers such as land and share registers will need to be updated to reflect the change of individual trustees in whose name the assets of the fund are registered. 

Further, with individual trustees, a single member fund is only allowed if there is a second trustee who is not a member.  However, with a corporate trustee, it is not necessary to involve a second person. 

Further, if the assets of the SMSF are held in the name of a corporate trustee, there is a clear line of delineation between assets owned by the SMSF and assets owned by the individual members.  We also recommend that a company which acts as a trustee of an SMSF should not act or trade in any other capacity so as to avoid any confusion as to which assets are owned by the SMSF and which are owned by the company if it is used for another purpose other than as trustee for the SMSF. 

There are additional costs associated with the incorporation of a company to act as trustee of an SMSF. There fees are avoided if there are individual trustees.  Further, a company which acts as a corporate trustee of an SMSF incurs an annual fee payable to ASIC, although that annual fee is quite modest if the company is established for the special purpose of acting as a trustee of an SMSF. 

Therefore, although the use of a corporate trustee involves additional establishment fees which are not paid when individuals act as trustee of the SMSF, the ongoing administration costs are generally reduced when an SMSF is managed by a corporate trustee because fees will not have to be incurred when there is a change in individual trustees. 

Should you require any advice concerning SMSFs, particularly in the context of estate planning considerations, please contact Charles Beresford or Susan Biggs

Charles Beresford

May 2019