I have had a lot of discussions recently with people who are considering establishing or have established self managed superannuation funds. One of the most common questions that I am asked when we discuss structure surrounds who should be the trustee of the fund?
In every case I have suggested to these people that it is always preferable to have a corporate trustee established to act as trustee of the fund as opposed to individual trustees. The main reason why corporate trustees are not established to act as trustee is due to the cost of establishment and ongoing maintenance. Whilst this is a more expensive alternative than having individual trustees there are clear benefits to having a corporate trustee in place that will outweigh the upfront and ongoing costs that exist.
Administrative Ease
In the event that there is ever a need to change a trustee – such as a new member joining the fund or the death of an existing member – the use of a corporate trustee avoids the administrative burden of having to notify all of the asset registries, banks, land titles office and the Australian Taxation Office of the change.
All superannuation assets need to be held in the name of the trustee or trustees. When a company is used as a trustee all of the assets are held in the name of the company. This does not change notwithstanding that the directors of that company may change.
For a fund that has individual trustees and many assets, the notification of any changes to share registries and other organisations can be time consuming, administratively cumbersome (due to the amount of paperwork) and potentially expensive if you need to engage professional help to assist.
The use of a corporate trustee avoids that situation.
In the event that the event that a change is required to the trustee arrangements, more often than not this can be dealt with through the lodgement of forms with ASIC.
Succession Planning and Perpetuity
Unlike an individual, a company can continue indefinitely. This provides certainty in relation to control of the fund in the event of death or incapacity of fund members.
Sole Member Funds
The use of a corporate trustee enables an individual to establish and manage a single member DIY fund without the need to appoint another individual as a trustee who will then become involved in the fund’s decision making process.
Existing Funds
In the event that you have a DIY Fund with individual trustees and wish to change to a corporate trustee you must first determine if the superannuation fund’s trustee deed allows this to occur. If it does not, you will need to arrange to have the trust deed amended by a lawyer.
Once the deed allows a corporate trustee to be appointed, the fund trustees will then have to advise all relevant banks, brokers, share registries and titles offices of the new corporate ownership.
Can you use an existing company?
In some cases people already have an existing company established (e.g. to run a family business). There is nothing that prevents an existing company from being appointed as the trustee of a superannuation fund although there are potential risks and problems if that company is conducting some other activity at the same time.
If the company is sued or suffers financial hardship, all its assets may be exposed to third parties. This means that all of the company-owned assets may be vulnerable.
Therefore it is my recommendation that a “clean-skin” company that conducts no other activities nor holds any other assets act as the trustee.
Written By Andrew Mattner
Hattam McCarthy Reeves
Chartered Accountants and Business Advisers
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