As detailed above there are no administration benefits, fee savings or taxation savings by using a Company Trustee, however there is a cost to setup the company of and an ongoing ASIC fee of approximately . Notwithstanding this, we have detailed below some reasons clients elect to use a Company as the Trustee of their SMSF. For most clients the reasons below are not material enough to justify the additional expense of using a Company as Trustee. But the choice is ultimately yours! It is important to note if you setup the SMSF with Individual Trustees you are always free to change to a Company Trustee at anytime in the future.
Reason 1: You only have One Person
There are times where a client only wants to establish a SMSF for one person and does not want a second Individual Trustee. In this instance the only option is to establish a Company to act as Trustee for the SMSF. The sole person will in turn be the sole Director and Shareholder of the Company giving them total control of the SMSF.
Reason 2: You are worried about what happens when a Trustee leaves the SMSF or dies
If you have Individual Trustees and one Trustee leaves the SMSF or dies you cannot continue the SMSF with only one Individual Trustee. To avoid this issue some clients setup a Company to act as their SMSF Trustee. However this is unnecessary because if you have two Individual Trustees and one person leaves or dies you can simply appoint a new Individual Trustee who is over 18 (eg. child, friend, parent, spouse etc.) at that time. Alternatively if you are left with one Individual Trustee and cannot find a second Individual Trustee, you can appoint a Company Trustee at that time and the SMSF can continue in the normal way.
Reason 3: Avoiding the need to update Account Names
When you add or remove Trustees in your SMSF, you must update all the accounts that the SMSF has. Accordingly if you have Individual Trustees and a Trustee is added or removed then the Broker Account, Transaction Bank Account and all other accounts the SMSF has, must be updated with the details of the new Trustee. This is not necessary with a Company Trustee as the Company always remains as the Trustee even if the underlying Directors and Shareholders of the Company change. It is important to note that changing the account details with Broker and Transaction Bank is handled by ESUPERFUND free of charge.
Reason 4: You want a higher LVR for Property
If you are considering purchasing Property with Borrowings in your SMSF then you Lender may lend more to your SMSF, if you have a Company as the SMSF Trustee. For example for Residential Property, Macquarie Bank currently lends 80% of the Property Value if you have a Company Trustee whereas they will only lend 72% of the Property Value if you have Individual Trustees for your SMSF. Similarly for Commercial Property, Westpac currently lends 65% of the Property Value if you have a Company Trustee, whereas they will only lend 58.50 of the Property Value if you have Individual Trustees for your SMSF. If you require the additional Borrowing Capacity you may need to consider appointing a Company as Trustee.