Corporate Trustee

Corporate Trusteeship means having a Company rather than an individual as the Trustee of your SMSF. This type of Company is known as a ‘Special Purpose Company’ because its only purpose is to act as a Trustee of an SMSF.

According to ATO statistics, the Trustees of around 80% of all SMSFs are individuals. Superannuation Warehouse’s default position is to establish new SMSFs with Individual Trustees.

This being said, Superannuation Warehouse can set up your SMSF with a Corporate Trustee if you wish. The major disadvantage of a Corporate Trustee is the upfront cost of establishing the Company. Further pros and cons are set out below.

Disadvantages of using a Corporate Trustee

Higher set-up fees;
There is an annual fee to ASIC for maintenance of this entity (you can pay this from the SMSF);
Due to this extra legal structure, no extra protection is offered to SMSF assets.
When there are disagreements between Directors, a majority rule can be used whereas in an Individual Structure, decisions must be unanimous.

For an interesting article from 2024 regarding the use of a Corporate Trustee versus Individual Trustees, please click on the button below:

Corporate Trustee versus Individual Trustees article

Changing from Individual to a Corporate Trustee

It is relatively straightforward to change Trustees without affecting the SMSF. You can go from Individual Trustees to a Corporate Trustee and vice versa. When purchasing property with a loan, the banks generally require a Corporate Trustee structure over an Individual Trustee structure.

To execute a change in Trusteeship from Individual to Corporate, you must 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 Trustees of a corporate entity (click on the links to download these documents). These documents need to be signed by all Trustees or Directors of the Corporate Trustee to ensure ATO compliance.

A body corporate acting as a Trustee for a Self-Managed Super Fund will need a constitution. This is a key foundation document for every company registered through ASIC. This document outlines the following;

Who has power over the Corporate Trustee;
Who can be appointed as Director in the Corporate Trustee;
The decision making by the company and how meetings are regulated;
What powers do the shareholders and directors have within the Corporate Trustee.

The constitution for a body corporate acting as a Trustee for a Self-Managed Super Fund should be reviewed every 10 years.

Director ID

From 1 November 2021 all Directors of companies are required to apply for a Director ID. This includes Alternate Directors and Directors of Corporate Trustees of SMSFs. To apply for a Director ID, apply online from the Australian Business Registry Services (ABRS) website and log in using the myGovID app.

The timeline to apply for a Director ID is noted in the table below:

Date you became a director	Date you must 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

Here are the steps to get a Director ID number:

Step 1 – Set up myGovID

Step 2 – Gather your ID verification documents

tax file number (TFN)
your residential address as held by the ATO
information from two documents to verify your identity for example bank & super account details linked with the ATO

Step 3 – Complete your application to obtain the DIN. You can apply for a Director ID from the link below:

Apply for your Director ID

Fees

Apart from the initial set-up fees, Superannuation Warehouse does not charge a fee to maintain the Corporate Trustee. This is included in the fixed annual fee.

The ASIC annual review fee (fee payable to ASIC) for the Corporate Trustee is $59 from 1 July 2022 and increases to $63 from 1 July 2023. For details of the ASIC fee from 1 July 2023, please see here.

Single Member Funds

A single member SMSF with a Corporate Trustee allows the sole Member to be the only Director of the Company and have full control over the running of the SMSF. If the SMSF had Individual Trustees, another individual would be required to act as a second Trustee and assist in the running of the SMSF. See here for more information on single member funds.

Lastly, you need a Corporate Trustee structure if you want to add property with borrowing to your SMSF later on. The Corporate Trustee of a Bare Trust cannot also be the Corporate Trustee of an SMSF.

FAQs

Can I use an operating company as a Corporate Trustee?

An operating company can be used as a Corporate Trustee as long as the Directors of the company are also the Members of the Fund and Members are also the Directors of the company. However, there are some risks associated with doing so. If the operating company is liquidated, its position as a Trustee of the Fund could be compromised. Therefore, it is prudent to set up a Corporate Trustee Fund with a special purpose company whose sole purpose is to act as a Trustee of the Fund. No transactions should take place in a special purpose company.

The main risks of having a Corporate Trustee that have dual purposes were addressed in the Raelene Vivian, suing in her capacity as the Deputy Commissioner of Taxation (Superannuation) v Fitzgeralds [2007]case.

Is it better to set up a Corporate Trustee or an Individual Trustee Fund?

It is up to the Trustees whether or not to set up a Fund with a Corporate Trustee. Most of the Funds that we set up are Individual Trustee Funds. As per the article above, the Tax Office’s record shows that 93% of all Self Managed Super Funds are Individual Trustee Funds. If required, Trustees can convert their Individual Trustee Fund into a Corporate Trustee Fund by setting up a company to act as the Trustee of the Fund. One scenario which almost always requires a Corporate Trustee to be in place is when the SMSF acquires a loan from a bank in order to invest in properties. For more information on investing in a property with loans, please see here.

What information is needed to be added as a Director of the Corporate Trustee?

We are an ASIC agent and can add Directors to a Corporate Trustee. The information we will need are as follows:

Full Name (as per ATO Records), Address, Date of Birth and Place of Birth (City and Country).

Please email this over to us to execute the appointment of a Director or Alternative Director.

What are the maximum financial penalties as a Director of a Corporate Trustee?

Penalties as a director of a Corporate Trustee can be as high as $18,780 for different infringements including but not limited to lending to members and in-house asset breaches. Under an individual Structure, while the penalty amount stays the same, it can be applied to all Trustees individually which can result in the fines payable being up to 4 times as large overall.

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Peace Of Mind

We are Melbourne based with clients throughout Australia. Our SMSF administration service is mostly paperless. This enable us to charge a fair fee, resulting in a good value-proposition for you.

No Advice

Superannuation Warehouse is an accounting firm and do not provide financial advice. All information provided has been prepared without taking into account any of the Trustees’ objectives, financial situation or needs. Because of that, Trustees are advised to consider their own circumstances before engaging our services.