Blog & Resources

Why do I need a corporate trustee for my bare trust when borrowing to purchase property inside a Self Managed Superannuation Fund (SMSF)?

Banks generally prefer utilising corporate trustees versus an individual trustee. Some financial institutions will actually insist on having a corporate trustee in the structure as a pre-requisite for lending funds.

As with corporate trustees in general there are added benefits of less compliance and administration, i.e., a company has an indefinite life span.  As members enter or exit the fund the only requirement is that changes to update the company directorships be lodged with the Australia Securities and Investments Commission (ASIC).

However, if the individual acting as trustee of the Bare Trust dies or wishes to leave the SMSF (i.e., through a divorce) then there will be numerous complications, including:

1.    The current member of the SMSF will have to appoint a new trustee;

2.    Arrange for the transfer of title with the State Revenue Office;

3.    Attend to the probate of the deceased trustee (in the event of death).

However, if the trustee was a company the only change required would be to change the directorship.

In terms of record keeping the use of an individual as trustee can create confusion as to who the beneficial owner of the asset is.  This can pose further problems if the individual trustee becomes bankrupt as their creditors may pursue the asset of SMSF.

The corporate trustee for the bare trust should have no other roles or responsibilities other than acting as trustee, i.e., it should <strong>not</strong> be used as an investment or trading company.