What Are The SMSF Trustee Eligibility And Responsibilities?

There are various important decisions to be made when one owns an SMSF, including who acts as the fund’s trustee. As one would expect, there are some strict rules regarding who can become an SMSF trustee and their responsibilities. There are various SMSF advisors In Perth who can give financial advice to people regarding their SMSF.

Who Can One Nominate As The Trustee Of An SMSF?

The role of a trustee is very important as they are responsible for making investment choices and decisions for the fund. One cannot simply nominate any person as the trustee of their SMSF, and one needs to decide whether their SMSF will have a corporate or an individual trustee. Some differences between them include trustee and member requirements, ownership of fund assets, penalties and separation of assets.

Differences Between Individual And Corporate Trustees

Both of the options have advantages and disadvantages for different circumstances. So it is necessary to know the differences between both the trustees.

• • Individual SMSF trustee

Some important aspects of having an individual trustee are-

1. 1. The SMSF needs to be between two and six members.
   2. Every member of the SMSF needs to be a trustee of the fund.
   3. One cannot nominate a trustee who is not a fund member.
   4. For single-member funds, the fund member can only be an employee of the second trustee if both of them are related.
   5. There need to be two trustees for single-member funds, and one of them needs to be a member of the fund.
   6. In some states, the law states that trusts are limited to five trustees. It could be an important rule if an individual has a six-member fund and wants to elect an individual trustee structure. This would not allow all members of the fund to be a trustee.

• • Corporate trustees

Holding a corporate trustee of the SMSF is different from an individual trustee structure, such as-.

1. 1. Every member of the SMSF needs to be a director of corporate trusts, and similarly, every director of the corporate trustee has to be a member of the fund.
   2. A corporate trustee is a company listed as the trustee of the SMSF. The individuals are not the trustees there.

Who Cannot Be The Individual Trustee Or Director Of The Corporate Trustee Of The SMSF?

Due to the important role of fund trusteeship, there are limitations on who is to be elected as the individual trustee or director of the corporate trustee of SMSFs. Even if a trustee complies with the above conditions, some people cannot take the role of a trustee. Those who include the list are-

• • Has committed an offence that involves dishonest conduct

• • Has been disqualified from the ATO from being a trustee of an SMSF

• • Has been subjected to a civil penalty under the legislation that operates superannuation

• • Is bankrupt or classified insolvent.

 Differences Between Individual And Corporate Trustee Structures

There are some differences between corporate and individual trustee structures; some of them are-

• • Cost

Individual trustee structure funds do not need to pay any ASIC fees. As a result, this is a low-cost option compared to corporate trustee structures. The company that acts as the trustee under a corporate structure needs to pay a yearly fee to ASIC. Many agents could give good SMSF advice, and they would prefer individual trustee structures over corporate ones.

While the cost of establishing an individual trustee structure is low compared to the alternative, additional costs could also be involved if one adds a new member to the fund. Costs can also be incurred if a fund member passes away. There is a greater level of administration needed when the fund has individual trustees in any of these circumstances. State government authorities could also charge fees to change the title of assets.

In a corporate structure, the company owns assets. Therefore, if members die or are introduced to the fund, there is no ownership charge, and no additional administration is needed. Registering and recording assets can be simple with a corporate trustee.

• • Ownership of assets and separation

When using a corporate trustee, the assets of the SMSF are owned by the firm. But under an individual structure, assets of the SMSF have to be owned by all the SMSF members. One needs to keep the assets separated between funds, members and trustees.

Fund assets of individual trustee-run SMSF have to be in the fund’s name and cannot be combined with the trustees’ assets. Under a corporate trustee, fund assets need to be in the fund’s name, and they cannot be combined with the personal assets of the fund director.

• • Penalties

If one considers which trustee type to go with, they may not think of financial penalties. SMSF trustees have to ensure that the SMSF falls under the country’s superannuation legislation. With a corporate trustee, the penalty for breaking laws might be less when compared to individual trustees. In an individual trustee, penalties are levied for each individual, but the penalties are only limited to a company in a corporate trustee. This is why proper SMSF management is needed to avoid fines.

Responsibilities Of SMSF Trustees

The various responsibilities of an SMSF trustee are as follows-

• • Developing an investment strategy

• • Make sure that super fund passes the sole purpose test

• • Making an investment strategy that includes deciding whether to take out personal insurance for members

• • Keeping an eye on the transfer cap limits and total super balance

• • Paperwork

• • Accepting superannuation contributions and ensuring payments made fall under the law.

Tips To Consider While Choosing An SMSF Trustee

Some tips that have to be considered while choosing an SMSF trustee for the fund are-

• • Ensure the trustee can enter into an LRBA in the SMSF trustee deed.

• • One can achieve a better level of reporting transparency by establishing a firm to be an SMSF trustee.

• • Considering an LRBA, one should prefer a company trustee structure as many lenders prefer this structure.

Hiring SMSF Services

If an individual owns an SMSF and needs help with investment decisions, they could contact SMSF services firms. Accounting professionals can provide many services for SMSF like advice, setup, investments, administration and structure. Some advisors specialize in superannuation and can provide support and updates on the latest superannuation developments.