An SMSF can have either individual trustees, or a corporate trustee. Under the individual structure, the trustees must be members, and vice versa. For corporate trustees, the directors of the trustee company must be members, and vice versa1. Historically, the number of trustees has been limited to four.

Initially, an individual trustee might be less costly, but those savings can disappear over time. The cost of setting up under a company has decreased significantly over the past decade and as a sole purpose SMSF trustee company, the Australian Securities and Investments Commission (ASIC) offers a significantly reduced annual fee.

Using a corporate trustee makes the funds asset ownership clearer and reduces administrative paperwork when there are membership changes – the more members, the greater the number of potential change events.

The advantages of a corporate trustee

Administrative penalties

The ATO imposes administrative penalties on each individual trustee, so, for example, if there were to be a $1,000 penalty applied to the trust, it would be applied to each trustee. In a four-person fund, that’s $4,000. In this scenario, directors of a corporate trustee would pay $1000 in total.

Administrative burden on change

Every time there is a change to the trustee structure, the ownership documentation of every investment and bank account must change. Where an SMSF has an individual trustee structure, this will occur every time a member joins or leaves the fund, and also when a trustee dies. This can cause stress at the most sensitive of times. There is a limited time period to satisfy the trustee and member rules.

For a corporate trustee, the trustee does not change where members leave or join the fund, there is only a change in directorship.


A single member fund must always have two individual trustees, whereas a company trustee can have a sole director who is the only member.

Asset protection

If an individual trustee is sued, the trustee’s personal assets are exposed. Companies provide greater protection when being sued because of their limited liability.

Separation of assets

Having a sole purpose corporate trustee makes ownership of assets quite clear. In contrast, assets held by individual trustees can look very similar to the personal or joint accounts held by trustees.

For bank accounts, this could potentially make accidental payments or transfers to and/or from the wrong account more likely, increasing the risk of an audit issue and penalties.

So why do some people choose individual trustees?

There are reasons people choose individual trustees as an option primarily based on:

  • It saves having to set up the company, so you save some time and money initially
  • There are no ongoing ASIC reporting obligations to comply with; and
  • Fewer procedural issues to deal with, as there are more flexible requirements for holding trustee meetings and no need to comply with a company constitution

However, the money saved at setup, and the time taken up by the ASIC requirements for a sole purpose company, are minor compared to the costs that will be incurred when the inevitable changes in ownership occur at a later stage.

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1 Exceptions apply in some circumstances, for example a single member fund is required to have either two individual trustees or a corporate trustee with one or two directors.

This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Past performance is not an indication of future performance. Investors should consult a range of resources, and if necessary, seek professional advice, before making investment decisions in regard to their objectives, financial and taxation situations and needs because these have not been taken into account.

Taxation considerations are general and based on present taxation laws and may be subject to change. You should seek independent, professional tax advice before making any decision based on this information. Commonwealth Bank is also not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and you should seek tax advice from a registered tax agent or a registered tax (financial) adviser if you intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law. While potential SMSF investments have been illustrated within this content they do not represent a comprehensive suite of possible investment products and services within the guidelines pursuant to the SIS Act 1993 with ATO oversight.