There has been much debate for many years about individual versus corporate trustees for self-managed superannuation funds.

One sticking point for many clients has been the additional cost involved with establishing a corporate trustee, but recent changes to the way the ATO will impose fines on trustees of SMSF’s has now increased the financial risks for individual trustees. As of 1 July 2014, the new penalty system for breaches of the legislation will be up to $10,200.

Where the trustee is a corporate body the directors of the company will be liable to pay the penalty together. Having individual trustees means that every member is responsible for ensuring that their SMSF meets all of the necessary legal and compliance requirements. This results in the penalty being imposed on each and every trustee which could increase the cost of the penalty quite substantially. To make matters worse, these costs cannot be paid or reimbursed from the fund.

The other major benefit of having a corporate trustee is that there is no need to change the trustee structure if a member dies or leaves the fund. All you need to do is remove or retire the outgoing director – quite simple.

The key message here is that it may be time to consider if a corporate trustee is more appropriate for you. The inconvenience, initial investment and ongoing costs of doing so may pale into insignificance compared with the future risk and inconvenience of staying as you are.