Choosing a trust structure

A super fund is a trust and the trustees are responsible for running the fund. If you start a self managed super fund, you and any other person with whom you start the fund, such as your spouse, will become trustees. You will then be required to act in accordance with:

  • the provisions of the Superannuation Industry (Supervision) Act
  • the fund’s trust deed
  • the Corporations Act (if a corporate trustee)
  • other rules imposed under tax and trust law.

Trust Structures 

There are two types of trust structures – a) where the individual members of the fund are also the trustees and b) where there is a company as corporate trustee and each member is a director of that company.

a) Individual Trustees 

An SMSF where the individual members are the trustees looks like this:

Each member of the fund is a trustee of the fund.

b) Corporate Trustee 

An SMSF where a company (usually a special purpose company) is the trustee will look like this:

This fund meets the requirements of an SMSF because all of the members of the fund are directors of the trustee company and there are no other directors of the trustee company.

What’s better, a corporate trustee or an individual trustee? 

A corporate trustee structure can be simpler when administering the fund, particularly in relation to the recording and registering of assets, or if the membership of the fund changes.

The main disadvantage of a corporate trustee is that it is more expensive to set up, and marginally more expensive to maintain. You will need to pay the costs to establish a company and then register that company with ASIC.  A company registration fee is payable initially, as well as an annual review fee.  There may also be other costs associated with establishing a company. 

Single Member Funds 

Under trust law, it isn’t possible for an individual to be both the sole trustee and the sole beneficiary of the fund. Accordingly, special provisions apply to single-member funds, which can have one of the following trustee structures:

  • a corporate trustee provided the member is the sole director of the trustee company; or
  • a corporate trustee, provided the member is one of only two directors of the trustee company, and the member is not an employee of the other director unless related; or
  • two individual trustees, provided the member is one of the trustees and the member is not an employee of the other trustee unless they are related.

Non-member trustees 

There are also some permitted circumstances where an individual who is not a member of the fund can act as a trustee. This applies when:

  • the member has died – in which case, the member’s legal personal representative can usually act as a trustee;
  • the member is under a legal disability – the member’s legal personal representative or person holding enduring power of attorney can act as a trustee; or
  • the member is a minor – the minor’s parent can act as a trustee.

Who can’t be a trustee? 

An individual can’t be a trustee if they are a ‘disqualified person’, which includes people who have been convicted of an offense involving dishonest conduct, are insolvent, under administration or an undischarged bankrupt, have been subject to a civil penalty imposed under the SIS Act, or have been disqualified by the ATO or APRA. 

A company can’t be a trustee if a responsible officer of the company is a disqualified person, a receiver or provisional liquidator has been appointed or the company is being wound up.