SMSF Corporate Trustee
A Corporate Trustee is when you have a Company as the Trustee of your SMSF. This is a ‘Special Purpose Company’ as its only purpose is to act as the Trustee of a SMSF. Around 80% of SMSFs set up are Individual Trustees per the ATO statistics. The reason for this is that it is simpler and more cost-efficient to use Individual Trustees rather than a Corporate Trustee. The default option Superannuation Warehouse uses to establish new SMSFs are with Individual Trustees. There is adequate statutory protection of an SMSF, so there is no pressing need to interpose yet another entity for asset protection purposes. Superannuation Warehouse can set up a Corporate Trustee if it preferred by you. The major disadvantage of a Corporate Trustee is the up-front cost of establishing the Company. The pros and cons are set out below.
| Advantages | Disadvantages |
|---|---|
| If there’s only one Trustee, you do not have to involve another Individual as Trustee | Higher set-up fees |
| When Trustees change, you can change Directors in the Company only and do not have to change the Trust Deed for the Trustees (although the Trust Deed might still need amended for a change in Beneficiaries) | There is an annual review fee of $63 payable for maintenance of this entity to ASIC (you can pay this from the SMSF) |
| Any potential penalties are applied to Directors in the Company collectively, as opposed to each Member paying the fine individually, as is the case in an Individual Trustee structure. | No extra protection offered to the SMSF assets due to this extra legal structure. |
See the link below for an article discussing the advantages and disadvantages between Individual and Corporate Trustees:
Individual v Corporate Trustees
Changing from Individual to a Corporate Trustee
It is fairly straightforward to change Trustees without affecting the SMSF. You can go from Individual Trustees to a Corporate Trustee and vice versa. When purchasing property, the banks may require a Corporate Trustee. To execute a change of Trustee to a Corporate Trustee, you will need to complete a Minutes Change of Trustee as well as a Trustee Consent. The new Trustees will also need to sign a new Trustee Declaration in their capacity as Trustee of the corporate entity (click on the links to download these documents).
Fees
Apart from the initial set-up fees, Superannuation Warehouse does not charge a fee to maintain the Corporate Trustee. This is all included in the fixed annual fee. Corporate Trustee companies are reviewed annually by ASIC and the review company statements will be posted directly to the Trustees of the Fund. We can assist the Trustees if they require any changes to be done for the Corporate Trustee, for example an address update, removal of Director etc. For a booklet on all the various fees that ASIC charges including the annual review fee please see the link below.
Single Member Funds
Single Member SMSFs with a Corporate Trustee allows the only Member to be the sole Director of the Company and have full control over running of the SMSF. If the SMSF had Individual Trustees, it would be necessary for another individual to act as the second Trustee and assist in the running of the SMSF. Lastly, if you want to add property to your SMSF later on, you may need a Corporate Trustee for that structure. The Corporate Trustee for the Bare Trust cannot be the same as the Corporate Trustee for the SMSF. Hence, a Corporate Trustee will have no benefit in a property Limited Recourse Borrowing Arrangement.
Director Identification Number (Director ID)
From 1 November 2021, Directors of the Companies are required to apply for the Director ID. This new requirement includes Directors of SMSF Corporate Trustees to apply for a Director ID. This Director ID is a unique 15-digit identifier that will stay with a Director indefinitely. ASIC implemented the requirement to offer a greater identity security and prevent false or fraudulent activity. Please note that any individual who is a Director or acting as an Alternate Director (POA) of an SMSF is required to register for a Director ID.
| Date of becoming a Director | Due date to apply |
|---|---|
| On or before 31 October 2021 | By 30 November 2022 |
| Between 1 November 2021 and 4 April 2022 | Within 28 days of appointment |
| From 5 April 2022 | Before appointment |
To see information regarding “Who needs to apply and when”, please see the link to the ABRS website.
How to register for Director Identification Number (Director ID)
A Director must apply for the Director ID themselves. A tax agent or another party is not allowed to apply for a Director ID on your behalf. The online application process takes minutes to complete and the Director ID will be issued instantly. There is no application fee. A Director ID can be applied for all Directors within Australia or when you are overseas. There are only 3 steps to apply for a Director ID: Step 1: Set up a myGov ID Step 2: Gather your identity documents Step 3: Complete your application Please see the process of applying for Director Identification Number here.
Frequently Asked Questions
Is the ASIC annual fee deductible in an SMSF?
A general rule is that a complying SMSF is entitled to deduct from its assessable income any expenses that are
- incurred in gaining or producing assessable income; and
- necessarily incurred in carrying on a business for the purpose of gaining or producing such income.
Our understanding is that if you set up a Corporate Trustee for the sole purpose of the SMSF; in other words, its only purpose is to act as a trustee of the SMSF, then the cost is concerned to be necessarily incurred for the SMSF’s business operations.
Can a trading company be used as a Corporate Trustee?
There is no prohibition in using a trading company for the purpose of acting as the Trustee for your SMSF. But there are risks that should be considered when taking this decision. For instance, if the company is used for running a business and if it doesn’t go well, there will be dealings with banks and liquidators. Risk will flow into the SMSF assets and will be costly to prove these assets only belong to the Fund. This issue was addressed in Raelene Vivian, suing in her capacity as the Deputy Commissioner of Taxation (Superannuation) v Fitzgeralds [2007] , case where it was difficult to prove if the Fund was maintained for one or more purposes.
