Who Should Be SMSF Trustees?

Superannuation laws require that every member of an SMSF must either be a trustee of the fund or a director of a company that is the trustee.

Having members act as trustees personally may appear simple and avoids the cost of establishing a company to undertake the role. Company law, however, allows a special purpose company to be established for this role for around $1,000, with low ongoing filing fees.

Company as Trustee of Your SMSF

There are a number of very good reasons why the trustee should be a company that does nothing except act as trustee of the SMSF. All of these should be considered when making the decision.

For example, there will never be a dispute about the capacity in which the company holds assets.

If the trustee of your SMSF is you personally, or a company that has other roles, there is a possibility that someone seeking to make a claim or take legal action against you or that company may believe the superannuation assets could be accessed if successful. While such a claim may ultimately be defended, the process would be costly and the outcome uncertain.

It is preferable to avoid superannuation assets coming to the attention of a claimant by having them clearly owned by a dedicated superannuation trustee company.

Companies for Estate Planning

SMSF trustees have a number of legal and practical obligations. If a trustee becomes incapable of running the SMSF, they must be replaced. This is not always a straightforward process. All investments and bank accounts would need to be transferred to the new trustee’s name, which can cause delays in providing income to fund members. Similar issues arise if a trustee dies.

A company acting as trustee continues in that role regardless of the health or capacity of its directors. Changing the director of a trustee company is a simple and inexpensive process if required.

Debts of Companies Are Not Paid by Directors

The debts of a company are not paid by its directors if the company has insufficient assets, except in limited circumstances.

While it is unlikely that an SMSF trustee would incur debts it cannot meet, it is possible that a legal claim could arise. For example, if the fund owned a property and a public liability claim was made that was not adequately covered by insurance.

It should also be appreciated that one of the Australian Taxation Office’s sanctions is to declare a fund non-complying. This results in a tax assessment equal to 45% of the fund’s assets being issued to the trustee. The validity of such an assessment was upheld in the 2011 Triway Superannuation Fund case. Having a company, rather than an individual, receive such an assessment is clearly preferable.