- All members of an SMSF must also be either a trustee or a director of the fund’s corporate trustee.
- SMSF trustees have full responsibility for decisions, compliance, and the fund’s investment strategy.
- SMSFs can operate under either an individual trustee structure or a corporate trustee structure.
If you're a member of an SMSF, you also must be a trustee of your SMSF or a director of its corporate trustee. That means you have a say in how your SMSF is operated, what it's invested in, and any changes made to it or its wealth building strategy.
What is an SMSF trustee?
An SMSF trustee is a person or company that has partial or complete control of an SMSF. Trustees make decisions for the fund and ensure it's compliant with superannuation rules and legislation, as well as its own objectives.
In an industry or retail super fund, a board of trustees make decisions on behalf of fund members. However, in an SMSF, all members - of which there must be between one and six- are either trustees or directors of a company that acts as trustee. As an SMSF trustee, you’re in control of all the investing, and you’re responsible for the fund’s investment strategy.
There are two different types of SMSF structures that will determine how trustees operate:
- Individual trustees
Under an individual trustee structure, all members of the fund will act as trustees. Single-member SMSFs operating under an individual trustee structure will need to appoint a second trustee. - Corporate trustee
A corporate trustee structure sees a company (dedicated or otherwise) acting as trustee, while all members must be directors of the company and thereby able to make decisions regarding their superannuation. In the case of single-member SMSFs, the company acting as trustee needs only one director.
Need-to-know details on SMSF individual trustee structures
Individual trustee structures are simplier and cheaper to set up but lack certain flexibilities that corporate structures can offer. When establishing your SMSF with individual trustees, there are no applicable ASIC fees and there are fewer ongoing administrative requirements.
While individual structures may cost less to get going, if an individual trustee is removed or added things can get murky. All of the SMSF’s assets must be the names of all members, meaning if a member joins, leaves, or passes away, the names attached to all assets much be changed - this can be costly and time-consuming.
Additionally, if any laws are broken in running your SMSF, administrative penalties are levied on each individual trustee. The value of a penalty unit is $222 per trustee, meaning multi-member individual trustee structures may pay more overall in the case of a breach.
Need-to-know details on SMSF corporate trustee structures
Establishing a corporate trustee SMSF works a little differently. There is a fee to register a corporate trustee with ASIC and annual review fees thereon out. Fees are generally lower if the company acting as trustee is solely used for that purpose and higher if it performs another function, too, like running a business.
However, the extra costs can be worthwhile if your SMSF ends up adding or removing trust members, as the corporate trustee won’t change and, therefore, ownership of the SMSF's assets remain the same.
If any super laws are broken, administrative penalties are levied on the single corporate trustee, rather than potentially multiple individual trustees.
Individual trustees vs. corporate trustee: A comparison
Let’s compare some of the most notable benefits and drawbacks of each trust type.
| SMSF with individual trustees | SMSF with corporate trustee | |
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How to appoint trustees or directors
Made up your mind about the best structure for your SMSF? Next up is adding trustees or directors. But first on the agenda is making sure all new trustees or directors are eligible.
A person needs to be over 18 years old to be an SMSF trustee or director of an SMSF trustee. They also must not have a legal, relevant disability (for example, mental incapacity) or and they must not be a disqualified person.
Before becoming a trustee or director, you must be able to answer ‘no’ to the following questions provided by the Australian Taxation Office (ATO).
Have you ever been convicted of a dishonest office, in any state, territory, or a foreign country?
Have you ever been issues with a civil penalty order?
Are you currently bankrupt or insolvent under administration?
Have you been previously disqualified by the ATO or APRA?
If a person looking to join your fund answers ‘yes’ to any of these questions, they could choose to apply for a waiver of disqualified status, only if the office wasn’t a term of imprisonment for over two years or a fine of more than 120 penalty units.
In addition to meeting eligibility criteria, new trustees or directors need to understand what running an SMSF means. Whether a person is a trustee or director, they are responsible for running the fund and its investment decisions. While you can get outside help from people like financial advisors, accountants, or tax agents, the responsibility is ultimately on the trustees or trustee directors.
Sealing the deal
If this all sounds dandy and you’re ready to get started, the process of appointing a trustee or director is slightly different for each trust type. However, regardless of the structure, all trustees and directors must:
- Consent in writing to becoming a trustee/director and have this agreed upon by all relevant parties, and
- Sign the Trustee declaration, stating they understand their roles and responsibilities
This must be done within 21 days of becoming a trustee or director. The ATO must be notified within 28 days of any changes made to your SMSF - including of any new members.
All of these documents must be kept on file for at least 10 years after the SMSF runs its course, and penalties apply if this isn’t complied with.
Make sure you check your SMSF's trust deed
If you already have an SMSF and therefore an SMSF trust deed, the question of who can join might get a little more complicated. The trust deed needs to allow for new members to join and will state who can join (for example, relatives, spouse of relatives, children, etc.). If the trust doesn’t allow for members, or for the person you want to add, they won’t be able to become a trustee or director without the trust deed being updated.
If they can join, adding a member to an SMSF is slightly different for each trust type. For adding a member to an SMSF under a corporate trustee, they just need to be added as a director of the trust. Adding individual trustees, on the other hand, involves changing the titles of the trusts' assets.
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