Speaking to SMSF Adviser, Paramount Wealth Management principal Wayne Leggett pointed to suggestions being made late last year as to whether it will be a requirement to have corporate trustees.
“It wouldn’t surprise me if it was brought in this year,” said Mr Leggett. “It makes sense to have it legislated as long as they don’t require retrospective changes because there’d be a lot of funds out there with mum-and-dad trustees and you wouldn’t want them to have the hassle and expense of changing if there was no particular benefit.”
Mr Leggett echoed widespread views across the industry in suggesting corporate trustee structures, by and large, make a fund’s asset ownership much clearer.
“With mum-and-dad members that are trustees, sometimes there is confusion as to whether the asset belongs to the super fund or them jointly,” said Mr Legget.
Mr Leggett therefore stressed compulsion should only apply to new funds, but not existing funds.
“Changing trustees if you’ve got extensive assets becomes very difficult because of the paperwork required so if an existing fund isn’t gaining any benefit from doing it then they’re incurring a lot of expense and no gain.”
Do able, but a costly & unnecessary exercise when being sued over other matters.
If these three points arent enough to convince you that you should have a corporate trustee, then good luck to you.
My feeling is that individual trustees should make the change to a corporate trustee while all trustee members are alive and capable of signing off on the documents required to implement the change, and before a new member is likely to be added. This is much easier to do than when a member is dead, which creates a whole level of difficulty with probate etc. and chews into the time lines required for the changes to be made. Increasing the stress of the situation & the potential for mistakes to happen.
Just my view.
Efficiency of operation A fund with a corporate trustee is easier to operate, as you can do it with two directors signing documents, rather than requiring all trustees to sign it. A change in members does not require any work to change the name on the funds assets, which are in the company name & remain that way. All that is required is to prepare and lodge the necessary ASIC forms to note the change of Directors & the ATO notification of changes to the fund members. Simple.
Asset protection if the trustee is sued it is the company that is sued not necessarily the directors, unless they have been naughty, & being naughty a company may but generally wont protect you. If you have been honest and diligent, a company will generally protect you. If someone is suing you personally and they search for your assets & you are a trustee of a superfund, you have the added cost & problem of trying to prove that those assets are not your assets but the superfunds assets.
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All SMSFs should have a corporate trustee. The major reasons are cost effectiveness, efficiency of operation & asset protection. There are also others but these will do for this discussion.
Mr Leggett like many advisers doesnt appear to understand the benefits and that is one reason so many individuals are trustees. Yes, you save the cost of a company & the ASIC fee – currently $43 pa.
Cost effectiveness – if you have ever had a member die in a fund or added another member to a fund where trustees are individuals, then you will have wished that you had set up a corporate trustee in the first place. The compliance requirements and cost of making all the changes to the funds assets are both time consuming & costly, fraught with potential error & need to be completed within certain time frames where a member dies or is added to avoid a compliance breach. A breach and the associated penalty, if issued, by the ATO can also be very expensive per individual trustee.
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Corporate trustees are superior and ideally people should appoint one but how about letting SMSF members decide for themselves? Explain the pros and cons and let the people managing their own money elect which way they would like to go.
It is hard not to be suspicious this is another attempt to ratchet up the cost of administering a fund and then claim you now need $X in super before you can economically run a SMSF.
I agree if a new fund is set up then a corporate trustee should be mandatory IMO. And I would go further & say that over the next (say) 3 years, all trustees should be changed to corporate. There are too many disadvantages with individual trustees for this not to be the case. The cost of a Company is what $600 to setup plus $45pa to run.
Stewart I can’t find the break down of Corporate Vs Individual trustee in any ATO publication.
Let us get a sledgehammer to crack a walnut.
I agree in principal that a company is a better trustee structure, but if we are looking at the legislation, let us look at all the other inconsistencies as well, instead of patch working until we get a mess of legislation like our “simplified” tax system.
Has anyone bothered to look at the stats to see if it is a problem?
The above article is confusing. If a corporate trustee is of NO BENEFIT to existing mum & dad funds, when is it ever of benefit??
It would be very good initiative for SMSFs if the corporate trustees will be legislated, but if it to be retrospectively applied to existing SMSFs with individual trustees, it would be a disaster, as the funds with LRBA will have most to loose, the expense for each LRBA assured Trust Deed will need to be updated & every deed will be re-examined by the Lender’s Legal teams & guess what the lender’s fees will be as good as the New LRBA Loan application fee let alone the hassle!, As Mr Legget explained it should only be applied to New Funds.
If Trustees get confused by ownership if assets they SHOULDN’T have an SMSF