The way in which a self-managed super fund is structured could change its legal compliance requirements. If you are in the process of setting up an SMSF, you will need to make a decision about how to structure it appropriately to suit.
An SMSF can be structured as a single-member fund or a multiple-member fund, with the trustees of those funds deemed as either to be individual trustees or corporate trustees.
Examining the circumstances of your members could help to narrow down the structure that will be best suited. You can also work out from the requirements of each structure whether or not a fund structure would be suitable for the needs of your members.
Individual trustees in a single-member fund will have two trustees within the fund. One trustee must be the fund member, but cannot be the other trustee’s employee (unless they are also relatives). An example of a single member trust fund structure could be a family super fund, where the members are trustees for the fund..
Individual trustees in a multiple-member fund structure generally have between two to six members. Each fund member must be a trustee and each trustee must be a fund member. Like the single-member fund, members of this fund structure cannot be the employee of another member (unless they are relatives).
SMSFs that use individual trustees or are looking to use individual trustees in their structure may benefit from the following:
• The fund can be cheaper to establish, as a separate company does not need to be set up to act as a trustee.
• Trustees must follow the rules in the fund’s trust deed, the super laws and the tax laws.
• There are fewer reporting obligations which means it can be easier to administer, however, changing trustees can mean more paperwork and administrative costs. .
• Another trustee must be appointed if your fund only has two trustees and one leaves or dies to continue operating as an SMSF, or it must change to a corporate trustee structure. If the trustees change, you need to notify the ATO within 28 days.
• Fund assets must be held in the name of the fund or the names of the individual trustees, “as trustees for” the fund. If the trustees change, the name in each asset’s ownership document must be changed as well, which can be time-consuming and costly.
SMSFs that are set up using corporate trustees, typically set up a business or company to act as a trustee. The members within these kinds of funds are known as directors and will need to apply for a director identification number as such.
Corporate trustees within a single-member fund structure may have one or two directors, but one of those directors must be the fund member. If there are two directors, the member cannot be the other director’s employer (unless they are relatives).
Corporate trustees within a multiple-member fund structure generally number between two to six members, with each fund member also being a director. A member cannot be the employee of another member (unless they are relatives). An example of a corporate trustee SMSF could be a business acting as the trustee for a super fund, where the members are also directors of the fund.
SMSFs that use corporate trustees or are looking to use corporate trustees in their structure may benefit from the following:
• A company must be set up to act as the corporate trustee, for which ASIC will charge a fee to register them as a corporate trustee and an annual review fee.
• Directors must follow the rules in the fund’s trust deed, the super laws, the tax laws, the company’s constitution and the Corporations Act 2001.
• Company directors, including directors of an SMSF corporate trustee, will need to obtain a director identification number.
• There are some extra reporting obligations to ASIC but it can be easier to administer the ownership of fund assets and to keep fund assets separate from any personal or business assets.
• The corporate trustee does not change if a director leaves or dies, as it can operate with just one director. However, you will need to notify the ATO and ASIC within 28 days if the directors change.
• Fund assets must be held in the name of the fund or the names of the company, “as trustee for” the fund. If the directors change, the corporate trustee does not change so the titles of the fund assets are unchanged.
The setup of an SMSF can be a complicated process. You may benefit from speaking with a professional assisting you in its preparation and establishment. Choose someone who is qualified, registered and licensed, and right for you and your circumstances.