Corporate or individual trustees – the pros and the cons

When you set up a Self-Managed Superannuation Fund (SMSF), one of the first questions you will be asked is whether you will have individuals or a company as trustee.

If you have individuals as trustees, the members of the fund are also the trustees in their own name. For example, Michael and Mary Brown decide to set up the Brown Family Super Fund with individual trustees. In the fund documents, the trustees would be called “Michael Brown and Mary Brown as trustees for the Brown Family Super Fund” and all assets of the fund would be purchased in that name.

Alternatively, they may decide to set up a company as trustee (also known as a corporate trustee) and arrange for a new company called “The Browns Pty Limited” to be set up with themselves as directors. In the fund documents, the trustees would be called “The Browns Pty Limited as Trustee for the Brown Family Super Fund” and all assets of the fund would be purchased in that name.

There are advantages and disadvantages with each type of trustee, and some of these are shown in the table accompanying this article.

You can change from individual to corporate and vice-versa at any time fairly easily and without significant costs for the transfer of assets. The greatest difficulty in changing trustee arises from using a variety of names to purchase assets. For example, the Browns could have assets under all of these names:

• M and M Brown as trustee for Brown Family Super Fund
• Michael and Mary Brown as trustee for The Brown Family Superannuation Fund
• Michael Brown and Mary Brown ATF Brown SF.

Relevant investment registries would accept all of the above names, but when you come to move the assets to a new trustee, you may need to provide paperwork in the exact name in which the assets are registered before the registry will act. This may create an administrative burden. Ensuring that you use consistent names for investment purchases will save a great deal of difficulty later.

If your fund has been in existence for a while, you should consider examining the names in which investments are held and taking steps to ensure that they are all held in the same name.