Why it’s beneficial to have a corporate trustee

Whether it is your self-managed superannuation fund or your family trust, it can be beneficial having a corporate trustee rather than an individual trustee. Here are just a few of the advantages you will enjoy:

• When adding a person as trustee, it will be less work intensive with a corporate trustee because with individual trustees when you add one or more persons to be a trustee, it constitutes a change of trustees and when you have a corporate trustee adding a director to a company does not technically change the trustee itself since the trustee is the company;

• A corporate trustee cannot die and offers perpetual succession, compared to when an individual trustees dies it can be a big administrative hassles as ownership documents would have to be updated, especially if real estate is involved (the trustee has to show the ATO that no duty should be payable which involves submitting substantial paperwork);

• A sole purpose corporate trustee offers great asset protection for a trust at risk or in debt because if a trustee is sued and large debts result, an individual trustee might have their personal assets at stake if the trust assets are insufficient;

• If there is an ATO penalty notice issued against a superannuation fund it will be issued against each trustee of the fund which means that the penalty will be issued (and required to be paid) at least twice if there are two individuals acting as trustee rather than once in the case of a corporate trustee;

• The ATO has noted that contraventions of the “Separation of Assets” Rule is common and the relevant law states (in part) that a trustee must keep its money and assets separate from money and assets held by the trustee personally.  Having a sole purpose corporate trustee duly prevents this from occurring because of the separation of entities, and because the trustee will not have any personal money;

• There are highly technical rules for trustees being residents for a superannuation fund and it is usually easier to show that central management and control of a corporate trustee remains in Australia; and

• If a trust with individual trustees tries to engage in limited repayment borrowing with a bank lender, the bank will usually insist on a corporate trustee.  If this occurs part way through the process, it can be unnecessary delay to the process.