Olivia Long

The first step in establishing your SMSF is to consider your Trustee structure. If you are going to be a member of the SMSF, you must also act as a Trustee.

There are two trustee structures

  • Individual Trustees
  • Corporate Trustee

Individual Trustees

To establish your SMSF with Individuals as Trustees,  you must have at least two Trustees, even if you have only one member in the fund (you can have up to four). In the case of a sole member fund, you must choose an individual to act as trustee of the fund with you, and they have the same responsibilities and obligations as you, despite not being a member of the fund. If the fund has more than one member, each member of the fund must also act as an individual Trustee of the fund, so you do not need to appoint a non-member as trustee in this instance.

As individuals, you hold the assets jointly on trust for the super fund. This must be reflected in the ownership of all investments of the fund. For example,

Mr John James Smith & Mrs Mary May Smith as trustee for Smith Family Super Fund

The key benefit with this structure is cost. You do not need to incorporate a company, so you save on these fees. Companies must also prepare and lodge an annual review with ASIC which is an annual expense you can avoid.

Corporate Trustee

Where you have a single member fund, it is essential you appoint a second trustee or appoint a company to act as trustee for your SMSF. As a member of the SMSF, you must then be appointed as a Director of the company. It is possible to be the sole director of a company that acts as the corporate trustee of the super fund. For example,

Smith Family Pty Ltd as trustee for Smith Family Super Fund

SMSFs with more than one member may also prefer the corporate trustee structure as there are a number of benefits, being:

  • Administrative ease – as you can add and remove members in the fund without changing the name on your investments (particularly useful when investing in property)
  • Control – if you’re a single member fund do you really want another individual viewing your personal financial information, monitoring your fund and acting as trustee?
  • Perpetual succession and estate planning – a large proportion of SMSFs comprise a husband/wife. When one of the members dies, they need to appoint an alternate trustee effectively delegating some of the decision making and control to another individual. 

A trustee of an SMSF, in either structure, has an important role to play. This includes:

  • Responsibility for the ongoing compliance, administration and decision making for your fund;
  • The need to maintain your knowledge of investments and legislation surrounding SMSFs;
  • The potential for poor performance if your money is not managed wisely;
  • The potential for non-compliance in your fund.

As an SMSF Trustee, you are legally responsible for ensuring your super fund complies with SIS legislation and the super fund trust deed. These rules bind you to:

  • Act honestly in all matters concerning the fund;
  • Exercise the same degree of care, skill and diligence as an ordinary prudent person in managing the fund;
  • Act in the best interests of all fund beneficiaries;
  • Keep the money and assets of the fund separate from other money and assets (for example your personal assets);
  • Retain control over the fund;
  • Develop and implement an Investment Strategy;
  • Not enter into contracts or behave in a way that hinders trustees from performing or exercising their functions or powers; and
  • Allow members access to certain information.

People who willingly do the wrong thing in their SMSF face imprisonment and there are significant penalties associated with non-compliance in a SMSF. However, learn the basics, keep things simple and squeaky clean and you will have a great opportunity to maximise your retirement savings in your role as SMSF trustee.