The Difference Between Corporate & Individual Trustees

Superannuation is something most people try to avoid. The option of a corporate or individual trustee just seems to justify that conclusion. There is however a large difference between the two. The trend used to be a majority of people chose an individual trustee, but now better reporting and data shows 57% of self managed super funds (SMSF) are a corporate trustee. The difference between a corporate and individual trustee is a corporate trustee has the company as the trustee while the other has individuals instead. Read on to find out which is best for you.

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Self-managed super fund (SMSF)

The issue of which structure to choose all relates to a Self-Managed Superfund (SMSF). An SMSF is where you control your funds for your superannuation instead of letting another fund do it. A critical step is to create a trust deed. There are clear advantages such as not paying fees for someone else to manage your super. However, there are of course negatives such as fines and legal liability in the case that something goes wrong.

Individual Trustee

An individual trustee can be owned and operated by up-to 4 individuals.Therefore, every member of the SMSF is a trustee. Hence, every trustee is a member. When it comes to the cost it is significantly cheaper than a corporate structure. There are fees in place with ASIC for setting up a company. Likewise, if you use an individual trustee SMSF then you won’t need to deal with ASIC reporting requirements like a company. Although, if an individual trustee is removed or there is a change in structure then it could end up being expensive and time consuming.

Furthermore, the fund assets should stay separate to the personal assets. There is always the risk that you could mix up your personal assets and the trustee assets. If the fund is sued or there is a legal breach then the personal assets of the trustees can be at risk. This legal liability is something that is lacking in the case of a corporate trustee. If there are legal issues the costs can be the same for corporate and individual trustees. This means you could face the same penalties as a corporate SMSF but with the risk of your personal assets. If you unsure of which structure you should apply for you can check with a business lawyer.

Corporate Trustee

A corporate trustee means that they register the company as the trustee. They register the assets in the name of company which decided to set up the SMSF. Therefore, the personal assets are separate and held apart. To create a corporate trustee SMSF there is a fee the first time through ASIC. Then, there is an annual renewal fee to pay as well. The key aspect of a corporate trustee is the limited liability. Therefore, in the case of legal action a corporate trustee will have greater protection. Likewise, the structure of the company means if members leave or change it is easy to modify without the costs associated with an individual trustee. Unlike an individual trustee, if a trustee dies the account will survive for a corporate trustee.

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