When Is A Corporate Trustee Required?
Self managed superannuation should be established for the sole or dominant purpose of providing retirement benefits for members. If the sole or dominant purpose is the provision of lump sum benefits then appointing a corporate trustee is mandatory. If the sole or dominant purpose is the provision of pension benefits the trustee can be either two individual trustees (maximum of four trustees), or a corporate trustee. The Federal Government has limited jurisdiction to regulate the superannuation industry unless a corporate trustee or pension is involved. The concept of an corporate trustee grants the Federal Government such powers. Almost all self managed super funds are established with the dominant purpose of providing pensions. The majority of self managed super funds are established with two individual trustees, namely “Mum and Dad”.
Should I Set Up A Self Managed Superannuation with Individual Trustees or Corporate Trustee?
If you ask a superannuation lawyer they would recommend “a dedicated corporate trustee that does nothing other than act in the capacity of a trustee for the super fund”. That is a special purpose company. The benefit under such a structure is all SMSF investments will have a different ownership title to the members’ personal assets. This circumvents the dilemma of having to prove ownership of asset title in their capacity of trustees, as compared to ownership of title under their personal names. This provides asset protection from creditors in the event of financial difficulties.
In practice, most self managed super funds are established with “Mums and Dads” as individual trustees. This percentage is greater than 95%. One reason which can explain this preference, is the greater cost of setting up a self managed super fund with an SMSF corporate trustee. In addition, the involvement of ASIC as the corporate regulator for companies and the associated costs. As to which is the best preference, is totally dependent on a members’ personal circumstances. If the member of a fund, is a small business owner who wish to take extra precaution in asset protection, then an SMSF corporate trustee may be ideal. If the member of a fund has a low risk profile without the thought of venturing into business for himself/herself, then individual trustees may suffice.
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