Build an SMSF company that acts solely as the trustee of your Self-Managed Super Fund (SMSF). Allows for up to 6 members in your SMSF. Fully SIS Legislation compliant with Special Purpose Company rules.
The constitution prohibits distributing income and property to shareholders. It is ‘safer’ for your SMSF to have a Special Purpose company. You also save on ASIC’s annual charge.
When I started practising in superannuation law in the 1980s, the majority of SMSFs had just ‘dad’ as the trustee. In those days you only needed one trustee. Now all the members are trustees. Or all the members are directors of the SMSF corporate trustee. These days most superannuation lawyers, accountants and financial planners recommend a company as trustee of your SMSF. This is because:
You can’t mix SMSF assets with your other assets. A dedicated SMSF special purpose company has no other job. When ‘mum’ and ‘dad’ buy an asset for the SMSF, they may forget to add ‘as trustee for the SMSF’. There is a breach. In contrast, if you buy an asset in the name of the SMSF special purpose company and forget to put ‘atf SMSF’, it is not a big issue.
The SMSF company constitution is vital. The Constitution is the rules as to what the SMSF corporate trust does:
If you opt to just have mum and dad as the SMSF trustees then these issues are dealt with under the governing rules of the SMSF Fund Deed. But, when you have an SMSF corporate trustee the constitution controls these issues.
Anyone can own the shares in the SMSF corporate trustee. There are no SMSF rules on this. But the shareholders to the SMSF corporate trustee are generally mum and dad. The members of the SMSF usually hold the shares in the SMSF company. For:
Mutual Wills – when dad dies everything goes to mum. And once both mum and dad are dead everything to the children. If each other and then the children are to get the super at your death then that works. If not rethink your Estate Planning.
Single Will – you die. Whatever you own, such as shares in an SMSF company, go to your beneficiaries. If your beneficiaries are also getting your super then that works well. If not rethink your Estate Planning.
There is up to 32% tax on super. This is payable at the moment of your death.
Ensure the right people control the SMSF corporate trust shares. Especially upon your death. You Constitution is vital for a smooth transition.
Consider a Binding Death Benefit Nomination – that never expires.
Where a director dies or loses capacity they cease as a director of the SMSF company. Who replaces them? The (remaining) shareholders decide that.
A Will controls your shares. But a Will has no control over the appointment of directors. (Only shareholders control who the next director is.)
A company lives forever. But laws and fashion change. SMSF Company constitutes go out of date.
While you upgrade SMSF Deeds every 5 – 6 years. You generally only update an SMSF corporate trust every 12 years.
Also, update your SMSF corporate set of rules after a major change in legislation.
Q: My old SMSF Deed is 6 years old. And needs a Deed upgrade to a Legal Consolidated SMSF Deed. Also, the SMSF trustees are currently individuals. Can I update the Trustee and the Deed both at the same time?
A: Yes you can update the SMSF Deed and Trustee by this Deed of Variation to update Deed and change Trustees. It changes human trustees to your new company. And it upgrades your SMSF rules. Both at the same time.
(Do you only need to remove the human SMSF trustees? And put in your new company? Build this Deed of Variation to update Trustee. However, even if your SMSF is new you should take the opportunity to upgrade it to a Legal Consolidated SMSF Deed.)
Q: I’m a bit confused about using companies for a SMSF.
Can a Special Purpose Company be used as the Trustee for a SMSF?
Can a Special Purpose Company be used as the Trustee for a Bare Trust if investing in property?
Can a SMSF trustee be a Special Purpose Company?
A: Remember the only reason you have a Special Purpose Company is to save the ASIC annual fees. Otherwise, it has no purpose or value.
But if you have a Special Purpose Company then it can only be used as the trustee of a Self-Managed Super Fund. It can not do anything else. It cannot be trustee of a Bare Trust. It cannot be a trustee of a Custodian Trust. (This where the SMSF is borrowing money through a limited recourse gearing strategy.) It cannot be trustee of a Family Trust. The Special Purpose Company can have no assets (other than is share capital). So, the Special Purpose Company can not trade in its own right. So to answer your questions:
Adj Professor, Dr Brett Davies, CTA, AIAMA, BJuris, LLB, Dip Ed, BArts(Hons), LLM, MBA, SJD
Legal Consolidated Barristers and Solicitors
National Australian law firm
National: 1800 141 612
Mobile: 0477 796 959
Email: [email protected]