SMSF Set Up

When establishing a Self Managed Super Fund, the legislation requires a decision be made on the type of trustee, either individual or corporate, and different penalty regimes apply to each. Whilst higher penalties may be levied on corporate trustees, they are generally considered advantageous to individual trustee arrangement for reasons including:

• You can have a single director company as trustee for a single member SMSF (otherwise you need two individuals as trustee which means getting someone else involved in the fund’s affairs)

• It is easier to add/remove members as you only need to change the company director details (instead of changing the name in which all fund investments are held to recognise the new or revised individual trustees)

• Limited liability applies to companies so that the members have greater protection of their personal assets if someone sues the trustee for damages

• Greater control over their fund’s succession plan as their will can contain provisions dealing with their share in the corporate trustee and the effect it has on who controls the company

Whilst a corporate trustee is generally regarded as more advantageous, you can have individuals act as trustee of the SMSF. For individual trustees, the legislation allows the following:

• All members must also act as trustees

• For single member funds, an additional trustee may be appointed that is not a member

• Is a member of the fund being under the age of 18 they cannot act as trustee? In this case a parent or guardian must be appointed as trustee of the SMSF

As a guide the following should be considered when establishing an SMSF:

• Are any of the persons who want to be in the SMSF disqualified persons

  • If so, do they qualify to request a waiver of their disqualified status

• Are any of the persons who want to be in the SMSF intending to go overseas indefinitely in the future

• Are all of the persons suitable for an SMSF? 

• Can all the persons be in the same SMSF?

• Should they act as individual trustees or appoint a corporate trustee?

• Have you considered the operational practicality of the trustee and fund names chosen? 

• Does each person have arrangements in place in case of mental incapacity or other circumstances affecting their ability to act as a trustee/trustee director?

The following documentation and applications need to be created and executed to establish an SMSF:

• SMSF Trust Deed

• Member application forms

• Trustee consent to act forms

• ATO Trustee Declaration

• Notification in relation to death benefits

• Tax file number (TFN) and Australian Business Number (ABN) – link to article on when this can occur

• SMSF Investment Strategy

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Find out how Lifetime SMSF helps clients manage their Self Managed Super Funds here