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Should your SMSF have a corporate trustee or individual trustees?

By Bryce Figot and Daniel Butler
17 December 2019 — 2 minute read

An SMSF can either have a corporate trustee or individual trustees.

We strongly recommend that an SMSF have a sole purpose corporate trustee for the reasons outlined below. Further, a sole purpose SMSF corporate trustee qualifies for a substantially reduced annual ASIC review fee compared to a normal company.

The upfront cost of establishing a company generally results in long-term benefits that far outweigh the initial fee. These can be summarised as follows:

Corporate Trustee v Individual Trustees

Corporate Trustee

  • Continuous succession - A company has an indefinite life span; in other words, it cannot die. A company makes succession to control more certain on death or incapacity.

  • Administrative efficiency - On the admission or cessation of membership, that person becomes or ceases to be a director of the company. Thus, the title to all assets remains in the company’s name.

  • Sole member SMSF - You can have an SMSF where one individual is both the sole member and the sole director.

  • Greater asset protection - As companies have limited liability, they provide greater protection where a party sues the trustee for a liability or damages exceeding the fund’s assets.

  • Estate planning flexibility - A company offers much greater flexibility for estate planning in numerous aspects.

  • Lower penalties - Only one administrative penalty applies to the directors of a corporate trustee for each contravention. The directors are jointly and severally liable for each administrative penalty.

  • Overseas members - It is easier to manage an SMSF’s central management and control (‘CMC’) with a corporate trustee provided strategic and high level decisions are made in Australia.

  • Lump sums and pensions - An SMSF with a corporate trustee can pay benefits either as pensions or as lump sums.

Individual Trustees

  • Ceases upon death - Timely action must be taken on death to ensure the trustee/member rules are satisfied (SMSF rules do not allow a sole individual trustee/member SMSF)
  • Extra and costly paperwork - The admission or cessation of a member requires that person to become or cease to be an individual trustee. As trust assets must be held in all trustees’ names, the title to assets must be transferred to all of the individual trustees.

  • Sole member SMSF - A sole member SMSF must have two individual trustees.

  • Less asset protection - An individual trustee exposes their personal assets if the SMSF is liable for an amount exceeding the fund’s assets.

  • Extra administration and costs - The death of a member gives rise to considerable administrative work and costs at an inopportune time.

  • Higher penalties - An administrative penalty is imposed on each individual trustee for each contravention. Thus, having two individual trustees doubles the amount of each administrative penalty.
  • Extra risk - Generally it is more difficult maintaining CMC in Australia with individual trustees.

  • Lump sums or surrendering a pension - A member must surrender their pension entitlement if they wish to obtain a lump sum (a fund must have its primary purpose of paying a pension). Thus, extra paperwork is needed to surrender a pension entitlement to a lump sum payment.


Advisers should carefully consider setting up the correct structure from the beginning, as significant costs and administrative effort are involved in any future change of trustee. Furthermore, advisers should be proactive in encouraging their SMSF clients to establish a corporate trustee as it results in a considerable saving of money over the long term and numerous ongoing benefits from a succession planning and asset protection perspective.

Should your SMSF have a corporate trustee or individual trustees?
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