Contents
- What are the eligibility requirements for individual trustees of an SMSF?
- What are the eligibility requirements for company trustees of an SMSF?
- Who owns the assets in an SMSF?
- SMSF succession planning
An SMSF (Self Managed Super Fund) must have a trustee structure. A trustee is a legal term that refers to an individual or corporation who manages assets that are held in a trust.
A trust is another legal term that refers to an arrangement where trustees hold assets on behalf of beneficiaries.
So, an SMSF has trustees that are responsible for managing assets for the benefit of the SMSF members.
Under Australian SMSF supervision legislation, you can set up an SMSF with one of two potential structures:
- Two to six individuals
- A company.
There is no cost for having individual trustees for your SMSF.
If you are going to set up a company structure, there is a fee charged by the Australian Securities and Investment Commission (ASIC) to register the company. There is also an annual review fee.
Neither individual nor company trustees can charge for the services they provide to their SMSF.
What are the eligibility requirements for individual trustees of an SMSF?
- A single-member self-managed super fund must have two trustees. One of them must be the fund member. The other cannot be the employer of the fund member unless they are relatives.
- Self-managed super funds with more than one member (they can have up to four) can have up to four trustees. All of them must be members of the SMSF. They cannot be the employer of another fund member unless they are relatives.
What are the eligibility requirements for company trustees of an SMSF?
- A single-member fund can have a company with a maximum of two directors. The SMSF member must be a director of the company (either the sole director or one of the two directors). If there are two directors, the fund member cannot be an employee of the other director unless they are relatives.
- Self-managed super funds with more than one member can have a company structure provided that each member is a director and vice versa. A member can’t be the employer of another member unless they are relatives.
When a person stops being a member of the SMSF, they automatically cease to be a company trustee under this type of self-managed super fund structure. ASIC and the Australian Taxation Office (ATO) must be notified.
Who owns the assets in an SMSF?
The trustees have the title to all assets within the SMSF.
The fund’s assets must be kept separate from the assets that fund members personally hold. This can be easier to do with a company structure.
If an individual trustee is removed or an additional one is added, the titles to SMSF assets must be changed. This can be costly and time-consuming because there may be State government and/or bank fees involved in changing the ownership of the assets in the fund.
This is not necessary under a company structure, because the title to the self-managed super fund’s assets is in the registered company’s name.
The trustees are responsible for administering the SMSF. Failure to comply with superannuation legislation can result in financial or other penalties. SMSFs must have an annual SMSF audit to ensure compliance.
If the trustees are ever sued for damages, a company structure for a self-managed super fund offers greater protection because companies have limited liability.
SMSF succession planning
It can be useful to develop a succession plan when setting up your SMSF. This plan should outline what the fund will do if one of your trustees ceases to remain a member (for example, due to death or incapacity).
With a company structure for your SMSF, it can continue as a legal entity indefinitely. The control of the SMSF and its assets remains with the company.
This article is general information only and does not provide advice to address your personal circumstances. To make an informed decision you should contact an appropriately qualified professional.