| Criteria | Individual trustees | Corporate trustees |
|---|---|---|
| Asset protection | Individual trustees will be jointly and severally liable for any actions taken against the SMSF, i.e. the trustees’ personal assets may be exposed. | Companies have limited liability, and as such the liability is restricted to the assets held in the name of the trustee company. |
| Succession planning | Excessive paperwork is required in order to change individual trustees upon the death or incapacitation of an individual trustee.This can be a costly and time-consuming process. | Since a company has perpetual existence, the control of an SMSF is assured, as a successor director can step in on the death or incapacitation of a member if the shares in the trustee company are transferred in line with the deceased member’s will. |
| Administrative efficiency | All new members joining a SMSF are required to become trustees.Generally, all trust deeds require that the title of all assets are held in the name of all trustees.This creates a lot of administrative hassle to ensure the assets are held in the name of all trustees (new and old) and can be a costly process. | Admitting a new member or ceasing to be a member in a SMSF is considerably easy. The person either becomes or ceases to be a director in the company, by notifying ASIC of the change in directors within 28 days.The title over all trust assets will continue to vests in the name of the corporate trustee. |
| Lump sum payments | Can only pay benefits in the form of pensions, as their sole or primary purpose is the payment of old age pensions. However, if the trust deed allows for such payments, lump sum benefits can be paid. | May pay benefits as either a lump sum or a pension. |
Conclusion: Corporate trustees are recommended as a better and more efficient option.