Nicholas Ali, executive manager, technical support for SuperConcepts said there are two good reasons to use a company structure in the establishment of an SMSF – administrative efficiencies and legal liability.
“Those, in themselves, are two very good reasons to have a company structure,” he said.
“There is of course, the limited liability of a company if it has individual trustees, then there is the potential that if the superfund is sued for some particular reason, or the trustees are sued for some particular reason, then personal assets held by those individual trustees might be subject to litigious action.
“If you’ve got a company as trustee, then we’ve got the corporate veil that stops at that company level.
“Another benefit of having a company is as a trustee it’s clear who owns the asset so if it’s registered the name of individuals as trustees for the superannuation fund, there can be some confusion as to whether that’s an individual’s asset, or is that an asset of the superannuation fund, and that also comes to the fore potentially if there’s something like bankruptcy proceedings”.
Mr Ali said another benefit of a company structure for an SMSF in terms of administration is that it makes it very clear as to the separation of assets.
“There’s less potential for somebody to go and mistake the bank account because it’s got the same name as a personal bank account and put a deposit into that account when it should have gone into a personal bank account or vice versa – it makes that delineation much clearer,” he said.
The other option in setting up an SMSF is through an individual trustee structure, and one of the clear advantages of this is that costs less, Mr Ali said.
“It is cheaper. To have a company as trustee, you’ve got the cost of setting up a company so it’s a front and one-off cost of setting up the company. If you’ve got individuals as trustee, then there’s no cost of setting up so it is a cheaper option,” he said.
“That’s why traditionally, people have done it, because of the cost saving, but if you do a cost-benefit analysis, it makes sense to set up a company.”
