When setting up a self-managed super fund (SMSF), one of the most important decisions you’ll make is choosing the right SMSF trustee structure. This choice affects how the fund operates, complies with legislation, and how its assets are held and passed on.
Broadly, there are two options for your trustee setup:
- Individual trustees
- A corporate trustee (a company that acts as the legal trustee)
Each structure comes with its own advantages and drawbacks. In this article, we’ll compare corporate vs individual trustees, explain the SMSF setup process, and highlight how a trusted SMSF accountant can help you choose the right structure based on your circumstances.
Understanding the SMSF Trustee Structure
An SMSF must have either individual trustees or a corporate trustee. The trustee(s) are legally responsible for managing the fund, making investment decisions, and ensuring compliance with Australian superannuation laws.
- Individual Trustee: All members must be individual trustees. There must be at least two trustees, and they must also be fund members.
- Corporate Trustee: A company is appointed as the trustee. Each member of the SMSF is a director of the company. A company can have just one director.
The SMSF trustee structure you choose has long-term implications. Here’s how they compare.
1. SMSF Setup and Costs
- Individual Trustee:
- Lower upfront costs.
- No ASIC registration fees.
- Simple for couples or families just starting out.
- Corporate Trustee:
- Requires ASIC registration and company setup.
- Involves annual ASIC fees.
- Higher upfront cost, but may result in savings over time due to reduced administration and succession planning complexity.
While individual trustee structures are cheaper to start, the SMSF setup should be approached with a long-term perspective.
2. Ownership of Assets
The name on fund assets must reflect the trustee structure.
- Individual Trustee:
- Assets must be recorded in the names of all individual trustees.
- When a trustee is added or removed (due to marriage, death, divorce, etc.), assets need to be re-registered.
- Corporate Trustee:
- All assets are held in the company’s name.
- No changes needed to asset titles when directors change.
Asset ownership becomes much simpler with a corporate trustee, particularly in SMSFs expecting changes in membership.
3. Borrowing and Limited Recourse Borrowing Arrangements (LRBAs)
If you plan to borrow within your SMSF, say to invest in property:
- Corporate Trustee:
- Preferred by most lenders.
- The structure aligns better with LRBA requirements.
- Individual Trustee:
- May face more hurdles in obtaining finance.
- Not generally preferred by lenders.
An SMSF accountant will often recommend a corporate trustee at the SMSF setup stage if there’s any chance of borrowing in the future.
4. Single Member SMSFs
This is a common scenario for individuals who want full control of their superannuation.
- Individual Trustee:
- You must appoint a second person to act as a trustee.
- This second person doesn’t have to be a member, but they must act as a trustee and take on fiduciary responsibility.
- Corporate Trustee:
- The sole member can be the sole director of the corporate trustee.
- No need to involve anyone else.
A corporate trustee provides greater privacy, control, and simplicity for single-member SMSFs.
5. Succession and Estate Planning
Planning for incapacity or death is critical to maintaining control and continuity of the SMSF.
- Individual Trustee:
- The death or incapacity of a trustee can trigger the need to restructure the fund.
- New trustees must be appointed, and assets re-registered.
- This process can be time-consuming, emotionally difficult, and potentially expose the fund to non-compliance risk.
- Corporate Trustee:
- The company continues regardless of changes in directors.
- Provides a seamless transition of control to remaining or new directors.
A corporate trustee is the preferred structure for long-term estate planning and intergenerational SMSFs.
6. Compliance and Penalties
- Individual Trustee:
- Each trustee is personally liable for penalties issued by the ATO.
- If there are four trustees, each can be fined separately for the same breach.
- Corporate Trustee:
- Penalties apply once to the corporate entity.
- This reduces the financial impact of administrative errors or non-compliance.
This can be a major consideration, especially for larger funds or those just learning to navigate SMSF compliance rules.
When to Choose a Corporate Trustee
Although both trustee structures are legally accepted, many SMSF accountants recommend a corporate trustee for most funds, especially if:
- You’re the sole member and want to remain in full control
- You plan to borrow through your SMSF
- You expect membership changes (e.g., adding children later)
- You want to avoid asset title changes
- You value a smoother succession process
- You want to minimise the risk of multiple penalties for one mistake
When Might Individual Trustees Be Suitable?
An individual trustee structure might suit SMSFs where:
- The fund has two members who don’t expect changes
- Cost is a primary concern, and the fund is simple in nature
- Borrowing and complex strategies aren’t part of the plan
However, many SMSFs that start with individual trustees often convert to corporate trustees over time as complexity increases or members change.
The Role of Your SMSF Accountant
Your SMSF accountant plays a crucial role in setting up the fund, selecting the right trustee structure, and ensuring compliance from the outset. Their responsibilities include:
- Advising on the best SMSF trustee structure for your goals
- Assisting with company registration
- Ensuring assets are correctly titled
- Preparing trustee declarations and trust deeds
- Providing ongoing support for tax returns, audits, and compliance
It’s always best to engage a specialist accountant with experience in SMSFs to avoid common pitfalls and to ensure that your SMSF is built on a compliant and scalable foundation.
Final Thoughts
The trustee structure you choose is more than just an administrative decision—it determines how your fund operates, how assets are held, and how smoothly it functions as your life and retirement goals evolve.
Choosing between corporate vs individual trustee structures depends on your current needs and your future plans. While individual trustees are a valid option for simple, static SMSFs, the flexibility, efficiency, and protection offered by corporate trustees make them the preferred structure in most cases.
If you’re establishing a new SMSF or considering changing your current trustee structure, speak to a qualified SMSF accountant. Their expertise can help you navigate setup requirements, ensure compliance, and build a fund that supports your long-term financial security.
Need tailored advice on choosing the right SMSF trustee structure? Our SMSF accountants are here to help you with setup, compliance, and long-term planning. Contact us today for expert guidance on building a compliant and effective self-managed super fund.
