Individual vs Corporate Trustees: Why the Structure Matters for Your SMSF

When establishing a Self-Managed Superannuation Fund (SMSF), one of the first key decisions is whether to appoint individual trustees or a corporate trustee. While both structures are permitted, around 80% of new funds are now set up with a corporate trustee. Interestingly, this percentage is even higher when a financial adviser is involved in the process, yet much lower when one is not.
So, why are corporate trustees increasingly the preferred option?

Membership Changes Made Simple
In an SMSF, all members must also be either trustees (if individual trustees) or directors of the corporate trustee. When a new member joins, or when an existing member leaves or passes away, an individual trustee fund requires:
• Updating the title of every investment, and
• Amending the trust deed to reflect the change.
By contrast, with a corporate trustee, the process is simpler: only a notification to ASIC is required—even if only one director remains.

Sole Member Funds: Greater Flexibility
An SMSF with individual trustees must have at least two people in the role. This means a single-member fund still requires another individual, often a spouse or family member, to act as a trustee.
However, with a corporate trustee in place, a single member can be the sole director, retaining full control without the need for an additional person. For many couples—often husband and wife members—this can significantly ease the administrative and emotional burden on the surviving spouse if one passes away.

Asset Protection and Separation of Ownership
A corporate trustee also helps protect SMSF assets from being entangled with members’ personal or business dealings. Regulators require SMSF assets to be kept separate, but this separation is clearer under a corporate structure.
For example, there have been cases where SMSF property has been mistakenly used to secure personal or business loans. This not only risks the loss of the asset but also exposes members to unnecessary administrative complexity. Even where no encumbrance exists, proving that an asset in an individual’s name is actually held in trust for the SMSF can be a time-consuming process.

The Bottom Line
While individual trustees may appear simpler at the outset, the long-term benefits of a corporate trustee—administrative ease, asset protection, and flexibility—make it the more robust choice for most SMSFs.
If you’re considering establishing or reviewing your SMSF structure, it’s worth discussing the advantages of a corporate trustee with your adviser. The upfront costs of setting up a special-purpose company are usually outweighed by the efficiencies and protections it provides over time.

If you’d like to understand which trustee structure is right for your SMSF, speak with your Hewison adviser today.