An SMSF is a type of trust, similar to a Family Trust. Like all Trusts, an SMSF does not have a legal persona.
A legal persona is the ability to exist in the eyes of the law as a separate entity that can own property, enter into contracts, sue and be sued. Individuals and companies have legal personality; trusts do not. A trust is simply a legal relationship where assets are held by a Trustee for the benefit of beneficiaries.
Because an SMSF has no legal persona, all legal actions are carried out by the Trustee, who is the legal person. The Trustee can be either individuals or a company acting as a corporate Trustee.
What makes an SMSF different from other Trusts such as a Family Trust is that it is a superannuation Trust regulated under the SIS Act. Income and capital gains can be retained within the Fund, and benefits cannot be freely distributed. Instead, benefits may only be
paid to Members once they satisfy a condition of release, such as retirement, reaching preservation age or death.
If an SMSF has only one Individual Trustee and that Trustee dies, the Fund is left without a Trustee, meaning there is no legal person with authority to act on behalf of the Fund. This creates serious administrative and compliance issues, even though the trust itself continues to exist.
For this reason, SMSFs are usually set up with two or more Individual Trustees, or more commonly, a Corporate Trustee. A Corporate Trustee does not give the SMSF its own legal persona, but the company itself is a separate legal person that provides continuity, easier administration, and better succession planning, as the company continues to exist regardless of changes in membership or death of individuals.
The ATO provides guidance on the duties and responsibilities expected of Trustees of an SMSF, including complying with the SIS Act, ensuring the Fund meets the sole purpose test, maintaining proper records, preparing financial statements, lodging annual returns and acting in the best interests of Members. To confirm their understanding of these obligations, each Trustee, or Director of a Corporate Trustee, is required to sign an ATO Trustee Declaration, which acknowledges that they understand their legal duties and responsibilities. This declaration must generally be signed within 21 days of becoming a Trustee or Director and failure to do so may result in compliance action or penalties.
Setting up your SMSF
When an SMSF is first established, the Members or Trustees are responsible for paying the initial seeding costs personally, as the Fund does not yet hold any assets or have a bank account. These initial costs typically include setup fees, registration with the ATO and any professional advice sought during establishment. Once these seeding costs have been paid, the SMSF acquires its own legal persona, meaning it is recognized as a separate legal entity capable of holding assets, entering contracts, and conducting financial transactions in its own right.
With this legal status, an SMSF is expected to be actively maintained. It should not remain inactive for extended periods, as the ATO requires that an SMSF be established and operated for the genuine purpose of providing retirement benefits for its Members. Trustees have ongoing obligations to ensure the Fund complies with superannuation laws, even if there is minimal or no investment activity. These obligations include maintaining accurate records, preparing and lodging annual returns, and arranging for an independent audit of the Fund’s financial statements and compliance each year.
When we set up an SMSF, the seeding cost is the $450 which is paid during the online application. Trustees may reimburse themselves for the initial SMSF setup fee, provided the costs were directly related to setting up the SMSF.
How Do Corporate Trustees Enhance SMSF Performance and Compliance
(Individual Trustees vs Corporate Trustees)
The use of Corporate Trustees are being favoured more than ever before in recent years as just in the 2025 financial year had the ATO stated that 89.2% of new SMSF’s registrations are being established with a Corporate Trustee. This is partially due to a wide range of advantages the Corporate Trustee Structure offers compared to the disadvantages of an Individual Trustee Structure.
The advantages of a Corporate Trustee and the disadvantages of an Individual Trustee are:
- Enhanced asset protection – as the SMSF does not have a legal persona, assets like property would be registered under the Trustee’s name compared to the SMSF’s name. With an Individual Structured SMSF, there is no clear distinction between the SMSF’s owned assets and personally owed assets as the owner listed under the property’s Title Search would be their personal name, whereas with a Corporate Trustee Structured SMSF, the Corporate Trustee would be listed as the owner creating that distinction. The benefit of this is that if any creditors were to come after you individually and you had a Corporate Trustee Structured SMSF, they would have a hard time coming after your superannuation benefits.
- Adding a new Trustee or Director – when adding a Trustee or Director to the Fund, you must update your SMSF’s Bank accounts and relevant investment titles to include the additional Trustee or Director as all Trustees must be account holders. The advantage of having a Corporate Trustee is that as all assets are registered under the Corporate Trustee already, all that needs to be done is adding the individual as a Director to the company. Meanwhile, with an Individual Trustee structure you would need to re-register all the SMSF’s assets to include the new Trustee and in some instances, Banks may request you set-up a new account instead of making all the account name update.
- Borrowing within an SMSF – Lenders typically prefer a Corporate Trustee although it is not a SIS Act requirement and may deny your request for a loan unless you update the structure of your SMSF. This is due to the enhanced protection a Corporate Trustee delivers.
- Single Member Funds – A Corporate Trustee is special in the way it allows an individual to establish an SMSF by themselves avoiding the 2 Trustee minimum requirement.
- ATO penalties – If the Members of an SMSF have breached the superannuation laws then the ATO may impose a financial penalty, and with a Corporate Trustee as there is technically only one Trustee only, one penalty is issued. With an Individual Trustee Structured SMSF, this penalty may be issued to every single Trustee.
- Trustee death – If a Trustee passes away then the SMSF is at risk of becoming non-complying until a new Trustee is appointed. With a Corporate Trustee Structure, the remaining Director is fine to operate by themselves and the SMSF is not at risk of losing its complying status.
Meanwhile, the disadvantages of a Corporate Trustee are mainly fee related as a Corporate Trustee Structured SMSF costs more initially to set-up and has an annual review fee of $67. Whereas with an Individual Trustee Structured SMSF there is no need to set-up a Company and pay registration fees, making the initial set-up of an Individual Trustee SMSF more cost effective. The Individual Trustee Structure is also simpler and more straightforward which is a benefit as SMSF’s can already be quite confusing.
SMSF Trustee structure updates
For our clients, we generally see a 50/50 between Individual and Corporate Trustee SMSFs. This is mainly due to our clients being highly educated and fee sensitive, and being able to convert an Individual Trustee SMSF to a Corporate Trustee SMSF relatively easily. All that needs to be done is for the permanent files establishing the Fund to be reissued along with making the relevant updates with ASIC and the ATO. This update should also be paid from the SMSF and is tax deductible as it is not capital in nature.
How to select a Trustee
Individual Trustee selection factors to consider
If you decide to proceed with an Individual Trustee Structure then a general rule of thumb is to select a second Trustee of the Fund who you trust. You should be comfortable with knowing that the second Trustee of the Fund will have full disclosure of your financial position, be able to access your SMSF’s Bank account and withdraw money, and may refuse to sign off on your SMSF’s Financial Reports or decisions. Additionally, for Trustees that are not Members of the Fund note that you still have a legal obligation to operate the Fund in a compliant manner. This means that you can face penalties from the ATO if the sole Member of the Fund illegally accesses their super. Receiving this disqualification means you will not be able to operate an SMSF as a Trustee again unless cleared by the ATO.
Using an existing standard company implication
Instead of creating a Corporate Trustee you can use a standard company to act as the Trustee of your SMSF. This grants you all the advantages of a Corporate Trustee besides the
discounted annual review fee and enhanced protection. A Corporate Trustee has a special discounted annual review fee as its sole purpose it to act as the Trustee of the SMSF and does not engage in business activities. Although a standard company creates that clear distinction between personally owned assets and SMSF owned assets, it allows for additional risks as well. Disadvantages of using a Standard company are:
- Complications regarding company owned assets – creditors coming after your company may also come for your SMSF as they are now linked and company assets are not discerned from SMSF assets.
- All Directors of standard company must be Members of the Fund – if your standard company has 3 or more Directors, then all Directors must be Members of the Fund. If the company has 2 Directors, then you can remain as the only Member of the Fund.
- If you sell away your company you also essentially sell away your SMSF and its assets.
We are a registered ASIC Agent
In addition to being a Chartered Accounting firm in public practice specialising in SMSFs, we are also an ASIC agent. This means we set up and can make changes to your SMSF online with the regulator being ASIC.
Its worth it to note that many accounting practices charges their clients a fee to be the ASIC agent. We do not charge clients a fee. For simplicity and cost effectiveness, we use the Trustee address as registered ASIC address for the corporate entities attached to your SMSF. This means when an annual fee is received, you can pay for the Corporate or Custodian Trustee fees directly from the SMSF bank account. Remember for audit file completeness to keep a copy of all invoices paid on file to add to the audit trail for your SMSF.
When there’s Directors to be added or address changes to be made, we do this compliance update without additional charge for our SMSF clients.
Where Can You Find and Compare the Best SMSF Trustee Services in Melbourne
To find and compare the best SMSF Trustee services in Melbourne, Trustees can refer to a range of resources while keeping ATO guidelines in mind. The ATO encourages Trustees to seek professional advice and support to meet their obligations, but emphasizes that Trustees remain ultimately responsible for compliance.
Our website also provides a curated list of SMSF Trustee services and resources and detailed information regarding a range of different SMSF topics.
This includes the Trustee Education Plan booklet, which helps improve Trustee knowledge and understanding to effectively manage and operate an SMSF.
Conclusion
In an SMSF, the Trustee manages and controls the Fund, while each Member has an individual account balance representing their entitlement. Although investments are pooled, earnings are allocated to Members on a fair and reasonable basis, using the daily weighted average method. As a result, Members with larger balances receive a greater share of earnings, ensuring returns are distributed equitably across the Fund.