With over 86% of new SMSF's being opened with a corporate trustee, here are just some reasons why corporate trustee structures are the preferred approach by SMSF's and lenders alike:
- They provide a clear separation of assets from the individual's position, reducing the risk of unintentional commingling of SMSF and individual assets.
- They simplify any changes due to members joining or leaving an SMSF, as every member of the SMSF must also be a trustee or director of a corporate trustee.
- In the case of an SMSF loan, an SMSF with individual trustees will need to re-originate the loan if one member (and trustee) leaves the fund.
- With a corporate trustee, the borrower remains unchanged and a variation may be required to change or release a guarantor.
- It provides a simplified penalty regime if things go wrong. For corporate trustees, each director is jointly & severally liable for any penalties levied on the corporate trustee. In an individual arrangement, each trustee may be liable for the penalty and the ATO could elect to penalise each trustee.
This is just one question when establishing an SMSF and individuals should always seek the appropriate professional advice when considering the suitability of an SMSF.
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