Gday guys I'm feeling the need to go SMSF - this year has been an eye opener in my financial education. My last hurdle is this trustee structure - corporate or individual, what do people use here? I'm not into property and it will most likely be a relative setting it up with me. Thanks
If its just yourself you may need the corporate structure, but if its you and your wife, save the money and go individual trustee's. Thats what I did.
There are advantages and disadvantages to both. The main advantage of individual trustees is lower cost. The advantage of a corporate trustee is that it avoids any potential confusion about the owner of the asset (was it you as an individual or you as trustee of the super fund - doesn't sound like a big deal but it can be). Also continuity, in the event of death of one of the members it is much easier to deal with that change in the corporate trustee then at the individual trustee level. The company can also act as trustee of any other trust you may set up to run a business in the future. Main disadvantage is cost. About an extra $600 to set up and then another $225 in ASIC fees every year (this goes up periodically). There is limited liability in a company but not really an issue for a super fund. It really depends - we usually advise the use of a corporate trustee but it's really up to you.
Hi Somerset I have written an article about this, which has a useful tabular comparison which might help you to decide which to go for. This is at http://www.directdocs.com.au/ozstree.html. One thing to note is that a minor child cannot be a member of a fund with a corporate trustee. Actually, the annual ASIC fee is only $42 per annum. This is because the corporate trustee (if properly set up) is a "special purpose company". The extra one-off cost to set up the company is $426, this is paid to ASIC on incorporation. And the establishment pack is an extra $100.
Many thanks for the above Jorgon - thats a huge help as I've been losing sleep over the last few days about this.
Are these fees for email only or do they include the secretarial binder? Are the fees more for set up of non special purpose companies? If you wanted the company to act as trustee of a discretionary trust as I said in my post how much would the fees be?
There are five main reasons why you should use a special purpose PTY LTD company as trustee for your SMSF: A.Administrative efficiency B.To have a single member fund C.Ability to pay lump sums rather than just a pensions D.Access to the 15% pension rebate E.Liability protection
Usually even if there is only 1 smsf member you have 2 trustees, yourself and say an adult child, one of your parents etc as the other trustee.
A child can be a member of a fund with the a corporate Trustee if another member of the fund is also a director in the corporate Trustee and acts as the guardian until the child reaches the age of 18. I know I did it with my son. I passed minutes that documented this but our stupid accountant and auditor did not flag this to the ATO which resulted in us having a desk audit. When I supplied the documentation it passed. Spot on with the special purpose Asic corporate trustee. No longer an excuse about cost. Your SMSF is a trust why go half way? The problem with most people is they look at the short term rather than planning for the long term. The SMSF structure with a corporate Trustee is the best super system in the world. Kind Regards nonrecourse
The problem about having minor children as members of an SMSF with a corporate trustee has only recently been recognised by the ATO. It was raised in the National Tax Liaison Group (NTLG) Superannuation Technical Sub-group (STS) meeting of September 2010 (item 6.8). The sub-group is made up of ATO officers and superannuation tax professionals and regularly meets to discuss superannuation tax matters. In the meeting, the ATO stated "we do not consider that it is within the scope of (the legislation) to regard a fund as an SMSF if it has members who are under 18 years, a corporate trustee and the parent/guardian is not a legal personal representative". It stated that it was aware of less than 50 funds that may be in the position of effectively being treated as SMSFs even though they have members under 18 years of age and a corporate trustee in place and that it intended to resolve the issues with these funds "within the next six to nine months". In other words, these funds may not have been operating lawfully in the past and the ATO has only just realised this. From the notes of the meeting you get the impression that the ATO would be lenient on these funds and offer them some way to make amends. The problem arises because of a combination of these four things:- (a) The Corporations Act does not permit a minor child to be a director of the corporate trustee. (b) The Superannuation Industry (Supervision) Act ("the SIS Act") requires that each member is a director of the corporate trustee. (c) The SIS Act provides some exceptions to the requirement at (b). In particular it provides that a parent or guardian can be a trustee instead of a minor child. The word "trustee" here clearly refers to individual trustees and not to a director of a corporate trustee. So this does not work in the case of a corporate trustee. (d) The SIS Act also permits a "legal personal representative" to be a director of the corporate trustee instead of a minor child. However legal personal representative is defined [in section 10(2)] as meaning:- the executor of the will or administrator of the estate of a deceased person, the trustee of the estate of a person under a legal disability or a person who holds an enduring power of attorney granted by a person. Since a child cannot grant a valid power of attorney and (contrary to the belief of some) a parent is not automatically the trustee of the child's estate, this does not work either. And here it is clear that the trustee would need to be a trustee of the whole of the child's estate, and not just of that part of it that happens to be within the fund. Hence it is not possible to get round the rules by the parent declaring a trust in respect of monies contributed to the fund for the child. These problems don't arise where the SMSF has individual trustees, because then the child can be represented on the fund by one or both parents under (c) above (exactly how this is done will depend on the terms of the trust deed).
It would appear that Jorgon has updated his comparison chart and you can now get lump sum as an individual trustee.
A SMSF needs at least 2 trustees if you go for the individual method or if you just want to in effect be a trustee on your own you need the corporation method.
There has been no change to my comparison chart. It has always been the case that, in practice, the type of trustee makes no difference to the manner in which benefits can be paid. However, the legislation does require that where there are human trustees the trust deed must state that the sole or primary purpose of the fund is the provision of "old age pensions". This statement is not required in the case of a corporate trustee. The ability of the fund to pay a lump sum (provided of course that the condition for release of the money has been triggered) is a separate provision in the legislation, and applies both to human and to corporate trustees.
Not meaning to derail this thread, but would this be related to the birth certificate/strawman issue?
