Setting up an SMSF includes more than deciding how the fund will invest. You also need to pick who will act as its trustee: the members as individual trustees, or a company as a corporate trustee.
Both structures work in their own ways, but they differ in setup costs, administration, liability, and how easily the fund can adapt to future changes. Understanding these differences helps you choose a structure that fits your situation and long-term plans, while professional SMSF accounting services can help you manage the setup and ongoing requirements.
What Is the Difference Between an Individual and Corporate Trustee?
Before we jump into the nitty-gritty of how these structures work, let’s compare the two in overview.
Every SMSF needs a trustee to manage the fund and its assets. Both these structures helps in doing that.
With an individual trustee structure, the members of the SMSF are appointed as trustees in their own names. With a corporate trustee, a company is appointed as the trustee, while the SMSF members usually become directors of that company.
Both structures help manage an SMSF, but they differ in areas like setup and ongoing costs, administration, liability and the ease of the fund handling changes to its membership. This pertains to the general dynamic between the two.
The main differences between the two structures include:
| Factor | Individual Trustee | Corporate Trustee |
| Setup costs | Generally lower | Higher due to company establishment costs |
| Ongoing costs | No ASIC company annual review fee | ASIC annual review and company costs apply |
| Administration | Members act as trustees personally | Company acts as the trustee |
| Membership changes | Changes require updates to trustee and asset ownership arrangements | Generally simpler when members join or leave |
| Liability | Individuals act as trustees and can have personal liability | The company acts as the trustee, creating a separate legal entity |
Both structures can be suitable for an SMSF. The choice comes down to your fund’s membership, costs, administrative requirements and longer-term plans.
When Does Each Structure Make Sense?
The right trustee structure depends on your SMSF’s current circumstances and how you expect it to change over time.
An individual trustee suits you if:
- You have a simple SMSF structure with few members.
- The fund is unlikely to have changes in membership.
- You want to keep initial setup costs lower.
- Your fund’s administration is relatively direct.
A corporate trustee suits you if:
- Your SMSF has multiple members or membership may change in the future.
- You want the trustee to be a separate legal entity.
- You want a structure that can make changes to membership and trustee arrangements more direct.
- Succession or estate planning is a necessity for your SMSF.
The most suitable structure will depend on your circumstances, so consider seeking professional advice before establishing your SMSF.
Divided Between Corporate and Individual Trustee Structure?
Which SMSF Trustee Structure Should You Choose?
There is no single trustee structure that suits every SMSF. Consider your fund’s current membership, setup and costs, administrative requirements and future plans before picking between an individual or corporate trustee. Getting professional advice before establishing the fund also helps in avoiding structural changes and additional costs later.
Northern Beaches Accountancy makes the process simpler by helping you understand your options and set up your SMSF structure based on your circumstances. Our SMSF accounting services also support you with the accounting and compliance requirements of your fund.
