An SMSF can have no more than six members at any one time and are generally, though not always, members of the same family. A member cannot be an employee of another member unless they are related.
An SMSF is in essence just a trust and like any trust is run by the trustees. There are two SMSF trustee structures, one where the trustees work in their individual capacity and another where a company is appointed as the trustee. In both cases, it’s the members who run the fund and as a general rule, all members are either trustees themselves or directors of the corporate trustee. Also, it is only the members who run the SMSF and as such, all individual trustees or directors of the corporate trustee must generally be members of the fund.
SMSF trustee rules state that trustees cannot be paid for carrying out their trustee duties.
Certain people cannot act as an individual trustee or a director of a corporate trustee of a super fund including someone who:
has been convicted of an offence involving dishonest conduct
has been subject to a civil penalty under the superannuation legislation
is insolvent or under administration (an undischarged bankrupt)
has been disqualified from acting as a trustee of a superannuation fund by the ATO.
There are a number of differences between the two SMSF trustee structures and it is important to choose the one that’s the most suitable during the establishment of the SMSF as it can be quite difficult to change later on. The table below should assist you in determining the best structure for your circumstances.
Where a new member is admitted to a fund or a member departs including through death, there can be significantly more administration involved where there are individual trustees. This is due to the requirement that all trustees are members and where there are individual trustees, all assets should be in the name of all trustees.
For corporate trustees, the assets are held in the name of the company and no change in ownership occurs when a member joins or leaves.
With individual trustees, a single member fund is only allowed where there is a second trustee who is not a member.
But with a corporate trustee it’s not necessary to involve a second person, though it is permitted.
There are slightly increased establishment costs with a corporate trustee due to the additional requirement to register a company. The company also incurs an annual fee payable to ASIC, though this fee is quite low when the company only acts as trustee of the SMSF.
As the assets are held in the name of the company when using a corporate trustee, there can be no mistake or dispute over whether an asset belongs to the fund or to the individual. Where the company is used for other purposes there can be confusion over which assets belong to the SMSF and therefore, it is generally better to establish a new company solely to operate as the SMSF trustee.
All trustees are obligated to abide by the fund’s trust deed and the superannuation laws. Directors of corporate trustees will also have to comply with the company’s constitution and the laws applying to companies.
The information in this document has been prepared by Westpac Banking Corporation ABN 33 007 457 141 AFSL and Australian credit licence 233714. The information is general in nature and does not take into account your personal needs, objectives or circumstances and therefore, before acting on this information, you should consider whether it is appropriate for you.
BT Portfolio Services Ltd ABN 73 095 055 208 AFSL 233715 (BTPS) operates BT Panorama Investments (the investor directed portfolio service operated by BTPS). BT Funds Management Limited ABN 63 002 916 458 AFSL 233724 (BTFM) is the responsible entity and issuer of interests in BT Cash and Westpac Financial Services Ltd ABN 20 000 241 127 AFSL 233716 is the responsible entity and issuer of interests in BT Managed Portfolios. An Investor Guide is available for BT Panorama Investments and a PDS is available for BT Cash and BT Managed Portfolios (the Panorama products). These disclosure documents can be obtained from BTPS by visiting www.bt.com.au/smsf or calling 1300 881 716. A person should obtain and consider the disclosure documents before deciding whether to acquire, continue to hold or dispose of interests in the Panorama products.
BTPS, BTFM and WFSL are subsidiaries of Westpac Banking Corporation ABN 33 007 457 141 (Westpac). Apart from any interest investors may have in Westpac term deposits or securities acquired through Panorama, an investment in or acquired through Panorama is not an investment in a bank or a bank deposit. Westpac and its related entities do not guarantee an investment in or acquired through Panorama Investments.
© Westpac Banking Corporation 2016