Having a Special Purpose Company as your SMSF Trustee

As SMSF Specialists we often convert Companies that are acting as the Trustees of an SMSF to Special Purpose Companies.

The advantages of having a company as the Trustee of your Self-Managed Super Fund instead of individual (human) Trustees are numerous and worthy of a separate blog.

However, just to focus on one aspect: appointing and resigning new Directors is easy as long as the constitution is followed. A company also allows for a sole Director, in contrast with an individual structure, where the SMSF must always have two Trustees and if one passes away, a new Trustee must be appointed.

For an SMSF, a Special Purpose Company can be appointed to act as the Corporate Trustee. This company cannot do anything else other than act solely as the Trustee of a Regulated Superannuation Fund. In recognition of this, ASIC reduces the annual review fees substantially.

When we takeover SMSF clients, they sometimes have Pty Ltd Companies rather than a Special Purpose Company. This may be because the SMSF is an older fund. In this case it is important that the client does not use the company for anything other than acting as the Corporate Trustee of the SMSF.

We prefer to convert the Company to a Special Purpose Company*.

Why do we do this? The reasons are two-fold:

Firstly, to save on fees; after the initial outlay to convert a company to a special purpose company, there will be a saving of hundreds of dollars each year on ASIC fees for the life of the company.

Secondly and more importantly, if the company is an older company (before 1995), then the old Memorandum and Articles will state that two directors are required. The new Constitution for the Special Purpose Company will only require one director, which is consistent with Superannuation Law.

It is important to note that all constitutions should be reviewed (even newer ones) as some still state that two directors are required. This is also why we source all our documents from a reputable law firm as some of the documents from online providers are fraught with danger. If your constitution states that you require two directors and you only have one in place, even though you are following Superannuation Law you will be in breach of the Corporations Act 2001 so it is very important to make sure your Constitution is up to date.

*The exception is where a LRBA exists, in this case a Pty Ltd company is needed to be the Trustee Company for the Bare Trust, a Special Purpose Company cannot perform this function.

If you need assistance converting your Company to a Special Purpose Company, you can contact us for a quote. Call Susan on 0401 217901 or email susan@oconnoraccounting.com.au

Susan O’Connor is an SMSF expert and Winner of the 2021 Superannuation Specialist Accountant of the Year. She lives in Perth, WA with her two boys and is passionate about educating and inspiring people to get invested in their super.

The information contained in this blog is general information only and does not take into account your specific circumstances or objectives. Please speak to a licensed adviser or for specific SMSF advice contact us before acting on this information.

 

SMSF Accountant

Susan O’Connor

Susan O’Connor is an Accountant and SMSF expert with over 25 years of experience. Five years ago, she started her own successful accounting practice, specialising in SMSFs and all things super. She is passionate about teaching people about super and inspiring them to get invested in their own super. She has been awarded a Fellow of CPA’s, holds a B Bus and Diploma of Financial Planning, is a Registered Tax Agent, and holds an Australian Financial Services Licence to provide advice on SMSFs.

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