Trusts can be a challenging concept to understand and implement. It is important to consult with a legal practitioner if you are wanting to create a corporate trust, but if you would like to understand what a trust is and what the structure of a corporate trust entails before entering into one. This Legal Kitz blog will give you a quick overview to see if it is right for you!
What is trust?
A trust is a legally binding relationship where an individual or a corporate entity holds the title to the assets and property, known as the trust property. These trustees will also manage the trust property for the known beneficiaries which has been governed by the terms of a Trust Deed.
What is a corporate trustee?
In a trustee structure for your fund, you can choose one of the below:
- Individual trustee
- Corporate trustee
In this case, a corporate trustee will be an Australian company that has shareholder(s) and appoint directors to manage the trust. This corporate trustee will also distribute the assets to the beneficiaries.
Here, the member acts as a director of the company appointed as the trustee of the fund. In the case that there is a superannuation balance within the trust fund, that person automatically becomes the director of the company because they are a member of to fund. However, in some cases, if you don’t have a superannuation balance with the self-managed super fund, other directors can be appointed to the company.
What are the member and trustee requirements?
Funds that have more than one member:
In the trust, the following must be complied with:
- Between two to six members;
- Each member of the fund must be a director of the corporate trustee;
- Each director of the fund must be a member of the fund;
- All directors must have a director identification number; and
- A member cannot be an employee of another member. Relatives are excepted.
For single member funds:
In the trust, the following must be complied with:
- There can only be one or two directors;
- The member of the fund must be the only director or one of two directors;
- The director(s) must have a Director ID; and
- If there are two directors and the fund member is an employee of the other director. They must be relatives.
What are the costs?
The Australian Security and Investment Commission (ASIC) charges a first-time registration fee for corporate trustees. Annually, there is a review fee; this fee is smaller if the corporate trustee acts as a sole super fund trustee. The annual fee increases for corporate trustees that also perform another function, such as running a business.
Finally, a trustee cannot be paid for their services as a trustee, and the directors of the trust also cannot be paid for their services in the fund.
Ownership and fund assets
The title of the fund assets must be in the name of the current trustees as trustees for the fund. Recording and registering assets can be simpler, especially in cases of changes in membership. If a person ceases being a member of the self-managed super fund, they cease to be a director of the corporate trustee.
In the case of changes of directors to a corporate fund, ASIC must be notified.
Are there any penalties in the corporate fund?
In the circumstance that the superannuation laws are breached, the corporate trustee will be charged with administrative penalties. For example; if a corporate trustee fails to prepare financial accounts/ statements, the trustee will be charged with 10 penalty units, at $222 a unit.
Penalties can also be issued if the directors of the corporate trustee do not have a Director ID.
Legal advice
If you would like more information about corporate trusts or would like to discuss your options between individual trusts and corporate trusts, here at Legal Kitz, we offer a FREE 30-minute initial consultation with one of our experienced business specialists. You can also get in contact at [email protected] or at 1300 988 954.