Single Member SMSF

Setting Up a Single-Member SMSF: Individual vs Corporate Trustee

If you’re looking to set up a single-member Self-Managed Super Fund (SMSF), you have two options for structuring your fund: using individual trustees or a corporate trustee. Each option has its own advantages and disadvantages, especially for a solo member.

1. SMSF with Individual Trustees (for Single Members)

To set up a single-member SMSF with individual trustees, you are required to have at least two trustees. This means you must appoint another person as a co-trustee, even if they are not a member of the SMSF. The co-trustee can be a relative or someone unrelated, but they cannot be your employer.

2. SMSF with a Corporate Trustee (for Single Members)

With a corporate trustee, you can manage the SMSF entirely on your own without the need for another individual. This option is ideal for those who prefer full control and simplicity in managing their super fund.

Pros and Cons of Using an Individual Trustee for a Single-Member SMSF

Advantages:

• Lower setup costs: Establishing an SMSF with individual trustees is generally cheaper upfront.
• No ASIC annual review fees: You won’t need to pay for the ongoing ASIC company review fees required for a corporate trustee structure.
• Simpler paperwork: There’s less complexity in terms of corporate compliance.

Disadvantages:

• Shared legal ownership: The co-trustee becomes the legal owner of all your SMSF assets, even though they are not a member of your SMSF.
• Ongoing co-signature requirements: You’ll need their signature for critical tasks such as lodging tax returns, signing financial reports, and making investment decisions.
• Joint name on asset titles: All SMSF asset documents, including property titles, bank accounts, and investment certificates, will include both your name and the co-trustee’s name.
• Dependency on another trustee: You’ll need the co-trustee’s consent for key decisions like investments, starting a pension, or winding up the fund.
• Trustee replacement issues: If the co-trustee resigns, you will need to either find a new trustee or switch to a corporate trustee structure.
• Estate planning complications: If you pass away without a valid will or binding death nomination, the co-trustee may have authority over SMSF asset distribution.

Pros and Cons of Using a Corporate Trustee for a Single-Member SMSF

Advantages:

• Full control: As the sole director of the corporate trustee, you have complete control over all decisions regarding your SMSF and its assets.
• No co-trustee required: You can manage the SMSF without relying on anyone else.
• Flexibility in membership: If needed, you can add new members without changing the legal ownership of SMSF assets.

Disadvantages:

• Higher setup costs: A corporate trustee requires an initial setup cost of $880.
• Ongoing fees: There are annual fees of approximately $260 for ASIC compliance.

Conclusion: Why a Corporate Trustee is Ideal for Single-Member SMSFs

For single-member SMSFs, a corporate trustee offers more control, flexibility, and independence. Although the setup and ongoing fees are higher, it eliminates the need for relying on another individual trustee. If you value full control over your SMSF and prefer a streamlined structure, a corporate trustee is the better choice. However, if minimizing costs is your priority, an individual trustee setup can work, provided you have a trusted co-trustee.

Disclaimer: This article is for general information purposes only. It does not provide advice on setting up an SMSF or recommend a specific trustee structure. Please seek professional advice when selecting the appropriate trustee structure for your SMSF. We do not accept any liability for losses incurred based on the information in this article.