SUPERCentral is an independent online platform provider of SMSFs, advice, legal documentation and wealth management services to accounting and financial planning firms throughout Australia.
Jumbo SMSFs & Individual Trustees
While the Morrison Government is proceeding with its proposal to permit Jumbo SMSFs with 5 or 6 members, will Jumbo SMSFs have to have a company as trustee? This answer is determined by the legislation of the state or territory which applies to the SMSF.
In summary, some jurisdictions do permit having 4 or 5 trustees, other jurisdictions do not, while some permit 5 or 6 trustees so long as the assets of the fund do not include real estate.
The view of SUPERCentral is that the benefits of having a dedicated sole purpose company as trustee of SMSFs (whether jumbo or narrow bodied) substantially outweigh both the set up costs of a company (in particular the ASIC registration fee of $488) and the ongoing costs (ASIC annual review fees of $263 for an ordinary proprietary company or $53 for a special purpose proprietary company).
However, the position in each jurisdiction is set out below:
- New South Wales – if the trust deed expressly permits 5 or more individual trustees to be appointed – then there is no requirement that company must be the trustee. However, the statutory power, set out in the NSW Trustee Act 1925, to appoint replacement trustees cannot be used to appoint a 5th or subsequent trustee
- Victoria – if fund assets do not include real estate - then no limit to the number of individual trustees. If fund assets include land situated in Victoria then only a maximum of 4 individual trustees are permitted by the Trustee Act 1958
- Queensland – generally can only have a maximum of 4 individual trustees. If more than 4 trustees are appointed then subsequent appointments are, by reason of the Trusts Act 1973 invalid. However, there are exceptions for charitable trusts and where the Government grants an exception
- Tasmania – no statutory limit set out in Trustee Act 1898 as to the number of individual trustees
- South Australia – no statutory limit set out in the Trustee Act 1936 as to the number of individual trustees
- Western Australia – similar position as applies in NSW
- Northern Territory – no statutory limit set out in the Trustee Act 1893 as to the number of individual trustees
- Australian Capital Territory – similar position applies as in NSW.
One interesting issue, assuming the amendments to the Superannuation Industry (Supervision) Act 1993 are passed, is whether the inconsistent state and territory legislation will cease to apply to self managed superannuation funds which are regulated under that Act. This would be on the basis that Commonwealth Constitution provides that where Commonwealth Legislation is intended to exclusively deal with some subject matter, inconsistent state and territory legislation does not apply to that subject matter.
While SUPERCentral’s lawyers would be delighted to assist in running such a landmark constitutional law case, the wiser and far more prudent (and, more particularly, inexpensive) solution would be to simply have a corporate trustee.
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