Tim Miller, head of education for Smarter SMSF, said multi-member funds have only two options, and that is where membership must equal trusteeship or directorship.
“When it comes to single-member funds you can have the scenario where you can have one member and a sole director company, or you can have one member with a dual director company,” he said.
“The third option is that you can have one member with individual trustees, but you must have the member as one trustee and a second trustee to act.”
Aaron Dunn, CEO of Smarter SMSF, said the rules in regard to this issue are set out with section 17(A) of the Superannuation Industry (Supervision) Act, which states that all members must be directors, or all members must be trustees, and vice versa.
“With a single-member fund, the nuances of those three options become really important,” Dunn said.
Dunn gave a scenario of a couple who are looking to transfer money from the UK, who had an existing SMSF with husband and wife.
The spouse was under 55 years of age, which then gave rise to the fact that it was necessary to look at a separate SMSF that would allow for that UK pension transfer, predominantly because of the membership restrictions posed inside the deed limiting that membership to age 55.
Miller said the key issue with this example is the couple have an existing fund, they have an existing corporate trustee, and they wanted to know whether or not they could use that corporate trustee for the newly established SMSF, which would have both the husband and wife as directors.
He continued that in this scenario there was a situation where the couple could use the existing corporate trustee and just not add the wife as a member of the fund.
“Because we’re looking beyond the membership and only adding the husband in this instance, we can then ask whether the corporate trustee presents any problems. As it is just the two of them that are acting as directors, then from an s17(A) point of view, it satisfies that requirement.”
Dunn added this applies not only to directorship, but also incorporates shareholding, so in this instance, the husband and wife may each own shares allocated inside that company.
Miller continued that if there were concerns about having the same corporate trustee for two funds, another option is to establish a second company.
“That might be a bit extreme from a cost point of view, but they could also look at the individual trustee concept and have the husband and wife acting as individual trustees for that second fund,” he said.
“Again, there is no requirement for the second trustee to be a member.”
