One of the greatest aspects of an SMSF is the level of control you have in tailoring your Fund to meet your own retirement interests. The Members have the sole control and decide how the Fund will operate and what investments the Fund will invest in.
The significant question that comes up after deciding that an SMSF is right for you is choosing the Trustee – is an Individual or Corporate Trustee structure right for your SMSF.
An SMSF is a type of Trust similar to a Family Trust. As such the Trustee can be an Individual Trustee or a Company Trustee.
SMSF Trustee – Individual or Corporate
Becoming an SMSF Trustee
A Fund cannot have a sole individual as a Trustee. There must be more than one person as a Trustee if the Individual option is chosen. Therefore, you have a choice as to who becomes a Trustee of the Fund. This may include your partner, members of your family, a business partner, friends or generally anyone 18 years or over and not under a legal disability unless they are disqualified persons. The Trustees may act as Members of the Fund as well which would give them the opportunity to consolidate their super balances into the SMSF.
The term “settlor” refers to the person who establishes a Trust. In an SMSF, the settlor is the Trustee.
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An SMSF can have up to four Individual Members, each of whom must be a Trustee of the Fund.
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It is important to have a Second Trustee if it is a Single Member SMSF. You need to plan for what happens if you lose legal capacity, leave the country or die. To overcome this, you can simply appoint a Second Trustee given the following conditions:
- Member must be one of the Trustees
- Member is not an employee of the second trustee (unless they are related)
- No Trustee is paid for their duties or services as a Trustee
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You can also set up a Corporate Trustee for your SMSF if all of the following apply:
- All Members must be directors of the Company
- All Directors of the Company need to be members.
- No Member is an employee of another member, unless they’re related
- Corporate Trustee is not paid for its services as a Trustee
- No Director of the Corporate Trustee is paid for their duties or services as Director in relation to the Fund
What it means to be a Trustee
- Trustees need to act honestly in all matters concerning their Fund
- Trustees need to exercise skill and diligence in managing their Fund
- Trustees need to act in the best interest of all Members
- Keep the money and assets of the Fund separate from other money and assets (for example, your personal assets)
- Retain control over the Fund
- Trustees cannot enter into contracts or behave in a way that hinders them or other Trustees from performing or exercising functions or powers
- Keep Members informed and allow access to certain information
- Trustees cannot access or allow others to access funds early.
