SMSF Trustee Structures Explained: Individual vs Corporate

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Self-managed super funds (SMSFs) give you more control over your retirement savings. However, with that control comes responsibility. Before you can unlock the wealth-building potential of this strategy, you should decide first how your fund will be structured.

Under Australian law, an SMSF can be structured in one of two ways: an individual trustee or a corporate trustee. That choice can affect costs, administrative complexity, compliance risks, and how smoothly the fund runs over time.

What is an SMSF trustee?

At the heart of every self-managed super fund is a trustee, i.e., the individual(s) or company legally responsible for managing the fund.

• Individual trustee - under this structure, each fund member is personally appointed as a trustee.

• Corporate trustee - a company is appointed as the trustee, and each member is to become a director of that company.

Take note: Regardless of the structure, individual trustees and corporate trustees are required to meet the same legal duties and obligations, which the Australian Taxation Office (ATO) closely monitors.

The trustee role is not symbolic; it is a position of genuine responsibility that comes with strict compliance requirements.

The ATO expects trustees to be proactive, knowledgeable, and diligent. If something goes wrong, the responsibility (and the penalties) sit with the trustees, not with the accountant or financial adviser.

Key responsibilities of SMSF trustees

Understanding the core responsibilities of an SMSF trustee is essential before choosing the structure of the fund or taking on the role.

1. Complying with superannuation and tax laws

The responsibility of ensuring the fund is operated in line with the Superannuation Industry (Supervision) Act 1993 (SIS Act), ATO rulings, and the fund's trust deed falls under the trustees. This could cover everything from investment rules to contribution caps, benefit payment conditions and reporting deadlines.

Any breach can lead to penalties, trustee disqualification, or the fund being made non-complying, which can result in tax consequences.

2. Making and documenting investment decisions

Trustees control the fund's investment strategy, as such, they must set and regularly review the written investment strategy, ensure investment decisions are made for the sole purpose of providing retirement benefits, and keep records of meetings and the reasonings behind major investment choices.

3. Keeping SMSF assets separate from personal assets

Trustees must ensure the SMSF's money and investments are separate from their personal or business assets. This means the assets are legally held and identified as the fund's assets. This ensures transparency, prevents personal use of fund assets, and helps maintain compliance during audits.

Incorrect asset titling is consistently highlighted by the ATO and SMSF auditors as a frequent compliance issue, particularly under the rules requiring separation of fund assets.

4. Fulfilling reporting and tax obligations

Trustees are generally required to ensure the following are fulfilled:

• Lodging the completed annual SMSF return

• An independent audit is conducted each year

• Documenting all transactions and decisions

• Reporting to the ATO events like new members, director changes, or pension commencements

Take note: Missing deadlines or providing inaccurate records can result in administrative penalties.

5. Acting in the best interests of all members

Conflicts of interest must be managed carefully, especially in funds with related-party transactions or multiple generations as members.

Individual trustee structure: How it works, pros and cons

With an individual trustee structure, your SMSF can have up to six members, with each member personally appointed as a trustee.

Each member of the SMSF must be a trustee. For single-member funds with individual trustees, they must have two trustees: the member and one other person. The second trustee must not be an employee of the member unless they are a relative.

According to the ATO, some state and territory laws restrict the number of trustees a trust can have to less than 6. As an SMSF is a type of trust, consider seeking professional advice to confirm compliance.

Pros of an individual trustee structure

• Lower upfront cost - no need to register a company or pay ASIC fees.

• Simple - fewer initial steps when you establish the fund

Cons of an individual trustee structure

• Admin pain when people join or leave - If you add or remove a trustee (for example, after divorce, adult children joining, or a death), every asset title will likely need to be updated. This can mean state title office fees, bank and broker forms, and time-consuming admin legwork.

• Succession headaches - An SMSF with an individual trustee structure is required to have at least two trustees. This means if one dies or leaves, the fund has six months to appoint another trustee, change to a corporate trustee, or wind up the fund.

• Penalty exposure - The ATO imposes administrative penalties for breaches (such as failing to keep records or breaching in-house asset rules) on an individual trustee basis. Two individual trustees can effectively double the total dollar penalty compared with one corporate trustee.

Corporate trustee structure: How it works, pros and cons

If you choose a corporate trustee structure, a company acts as the trustee, and each member is required to be a director of that company.

If you're setting up an SMSF and you're the sole member, you can be the sole director of the corporate trustee or one of the two directors, provided you are relatives and not the employee of the other director.

Take note: Directors of a corporate trustee must have a director identification number (director ID), which is a unique identifier that a director will apply for once and keep forever.

If your SMSF has a corporate trustee structure, the fund's assets are owned in the company's name, which does not change even when membership changes - this particular aspect is a key advantage compared to an individual trustee (more on that below).

Pros of a corporate trustee structure

• Simpler when membership changes - When someone joins or leaves, you update the directors with ASIC and the ATO, but asset titles usually stay in the company name. This usually saves a lot of paperwork and fees over the life of the fund.

• Lower penalties - ATO administrative penalties are still paid personally by the directors, but penalties are generally calculated per trustee. Because penalties are assessed per trustee, and a corporate trustee counts as a single trustee, total penalties are generally lower.

• Clear separation of assets - Having a company as owner of the SMSF assets makes it easier to show that fund assets are separate from personal assets.

• Better succession planning - The corporate trustee can continue even if a director dies or leaves; you simply appoint a new director in line with the trust deed and company rules.

Cons of a corporate trustee structure

• Higher setup and ongoing costs - You are required to pay ASIC fees to register the company and an annual review fee.

• More governing rules to follow - in addition to superannuation and tax laws, you must also follow the rules in the company's constitution and the Corporations Act 2001.

Individual vs Corporate: Key differences at a glance

Which structure is better suited for you?

An individual trustee may be suitable for:

• Couples with a relatively simple, stable fund and no expected membership changes

• Investors who want the lowest possible establishment costs and understand the potential extra admin costs down the track

A corporate trustee may be suitable for:

• Single-member SMSFs

• Families expecting member changes

• Investors with larger balances who are more concerned with long-term efficiency

Can you change structures later?

Yes, you can change from an individual trustee to a corporate trustee structure (or vice versa). However, note that it can be time-consuming, especially where many assets need to be retitled and the trust deed updated.

This is why many specialists suggest thinking carefully about the long-term plan for the fund (member changes, estate planning, borrowing, and business property) before choosing a structure.

The individual route usually wins on cost at the start, while the corporate option often wins on administrative ease, lower penalty exposure, and greater flexibility over the life of the SMSF.

Given the complexity, it's wise to read the ATO's latest guidance on SMSFs and get personal advice from an SMSF-licensed adviser, accountant or lawyer before setting up or restructuring your fund.

Once you've chosen the right trustee structure for your fund, the next step is ensuring your SMSF has access to competitive finance. loans.com.au offers SMSF Home Loans and SMSF Commercial Loans that can help you unlock new opportunities for long-term growth. Go to our website to book your free consultation today!

Disclaimer: The information provided in this article is intended to be general in nature and does not constitute financial or legal advice. Please consider seeking professional advice tailored to your individual circumstances before making any financial or legal decisions.

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