Individual or corporate trustee?
It is the one structural decision at set-up, and the one most people have not thought about. Here is how the two differ, and where we stand.
- Chartered Accountants
- Registered tax agent
- Independent audit included
How they differ
| Individual trustees | Corporate trustee | |
|---|---|---|
| Who the trustee is | Each member, personally | A company, with members as its directors |
| Members allowed | Two to six, and never one | One is fine |
| When a member joins or leaves | Every asset has to be retitled | The company stays; only its directors change |
| When a member dies | The fund's title to its assets has to be sorted out at the worst possible time | The company continues |
| If the ATO applies an administrative penalty | Applied to each trustee, so a two-member fund pays it twice | Applied once, to the company |
| Cost at set-up | No company to register | An ASIC company registration fee |
| Cost each year | None | An ASIC annual review fee |
The retitling row is the one that decides it
With individual trustees, the fund's assets are held in the trustees' own names. So every time the membership changes, the legal ownership of everything the fund holds has to change with it.
For a share portfolio that is paperwork. For property it is a title transfer, and if the change happened because a member died, it falls to the surviving member in the weeks after a death.
A corporate trustee does not have this problem. The company owns the assets and continues to own them. Only who directs the company changes.
The trade
A corporate trustee costs an ASIC registration fee at the start and a review fee every year. Individual trustees cost neither.
That is a real saving and it is the whole case for individual trustees. Set against it: a single-member fund is not possible, penalties multiply by the number of trustees, and every membership change becomes a retitling exercise.
Both costs, and everything else a fund pays, are set out here.
Where we stand
We do not establish a fund with individual trustees. That is a policy about how we work, not a recommendation about your circumstances, and you should know it before you go further rather than discover it on a call.
The reasoning is the table above. We think an ASIC fee at the start and a review fee each year is the right trade against never having to retitle a property in the worst week of somebody's life. We think it every time, which is why we only do it one way, and the registration fee is inside our establishment fee rather than added to it.
If you have read that and still want individual trustees, we are the wrong firm for the set-up and we will say so on the call rather than after it.
Where we stop
The comparison above is general and factual. Which structure suits your circumstances, and whether an SMSF suits you at all, are questions that require an Australian financial services licence, and Cake SMSF does not hold one. We can tell you how the structures differ and how each is administered. We cannot tell you which to choose, and where the answer turns on your wider financial position it belongs with a licensed adviser.
Your fund should never be an afterthought.
Book a 15-minute call. We'll tell you what your fund costs to run with us, before you commit to anything.