Why self-managed superannuation funds should have corporate trustees

All members of a self-managed super fund must be trustees and legislation only allows a maximum of four people in an SMSF. With a sole member fund you need a family member to sit alongside you. If this is not practical you can have a company as a trustee and be the only shareholder and director. There are many other reasons why a corporate trustee is recommended over individuals including:

1. Administrative: When members come in or out (including death), there is a need to change bank account and other asset ownership details, which can be expensive and time-consuming and is not necessary with a company.
2. Lump sum payments can only occur with a company trustee.
3. Asset protection: While super is protected a pension may not be. But with a company a lump sum can be paid, which is protected in bankrupcy.
4. Power of attorney: A legal personal representative can be put in place if the member is incapacitated without changing members’ details.
5. Most banks require a corporate trustee if the fund is borrowing to purchase property.

With multiple members we would recommend that the SMSF and company be written in such a way as to give the directors and therefore memebers proportional voting rights to ensure people with higher balances are not taken advantage of by members with low balances, as the case is normally – one person, one vote.

Ken Raiss is a certified accountant and director of Chan & Naylor national accounting firm. Chan & Naylor offers a free five-minute question-and-answer session on its website under the "Ask the Experts" section.