Why use a special purpose company as the trustee of an SMSF?

It keeps fund assets separate from personal assets, reduces administrative risk and makes membership changes easier because only directorships change, not asset ownership.

How does a corporate trustee improve SMSF compliance?}

It provides clearer record keeping, simpler succession planning and stronger protection of fund assets. It also supports faster processing when members join or leave the fund.

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Why a Special Purpose Company Should Act as Trustee of an SMSF

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Choosing the right trustee structure for your SMSF is crucial for compliance, asset protection, and risk management. This blog post explains why a special purpose company should act as the trustee of an SMSF instead of using a business trading company.

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When establishing a Self-Managed Superannuation Fund (SMSF), one of the most critical decisions is choosing the right trustee structure. While some individuals opt to use an existing company that is already operating a business, this approach can create compliance risks, financial vulnerabilities, and asset protection issues.

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At Trinity Accounting Practice, we strongly recommend that SMSF trustees be set up as a special purpose company—a company designed exclusively for acting as the trustee of the SMSF, without engaging in any other business activities. Here’s why:

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1. Compliance with Superannuation Laws

The Superannuation Industry (Supervision) Act 1993 (SIS Act) has strict rules regarding who can be a director of an SMSF trustee company.

All directors of the corporate trustee must also be members of the SMSF.
If the trustee company operates a business, it may need to appoint additional directors over time.
If a new director is not a member of the SMSF, this breaches superannuation law, leading to compliance issues and potential penalties from the ATO.

💡 Best Practice: Using a special purpose company eliminates the risk of non-compliance, ensuring that only SMSF members serve as directors.

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2. Clear Separation of Assets

One of the fundamental principles of SMSFs is that their assets must be held separately from personal or business assets. If a business trading company is used as an SMSF trustee, it can be challenging to distinguish between:
✅ Business assets
✅ SMSF assets
✅ Personal assets

This lack of clarity can create complications during audits and may lead to legal or compliance risks.

💡 Best Practice: A dedicated SMSF trustee company ensures that fund assets are clearly separated, making compliance and audits more straightforward.

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3. Reduced Risk Exposure

A company that operates a business is always at risk of legal claims, debts, and lawsuits. If such a company is also the trustee of an SMSF, the superannuation assets could be at risk in case of litigation.

Similarly, if the SMSF trustee company is sued in its capacity as trustee, the business assets could also be impacted. This creates unnecessary financial risks that could jeopardize both the SMSF and the business.

💡 Best Practice: A special purpose trustee company protects SMSF assets from business-related legal disputes, reducing risk exposure.

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4. Protection from Financial Distress & Bankruptcy

If a business trading company acting as an SMSF trustee encounters financial difficulties—such as insolvency or bankruptcy—creditors may attempt to claim assets held under the company’s name. While superannuation funds are generally protected under bankruptcy laws, legal challenges can still arise if ownership records are unclear.

💡 Best Practice: A special purpose trustee company ensures that SMSF assets remain secure and legally protected, even if the business encounters financial hardship.

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Why Choose Trinity Accounting Practice for SMSF Structuring?

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At Trinity Accounting Practice, we specialize in SMSF compliance, structuring, and administration. Our team ensures that your fund is set up correctly with a dedicated trustee company, safeguarding your retirement savings and minimizing compliance risks.

🔹 Expert guidance on SMSF setup and compliance
🔹 Assistance with establishing a special purpose corporate trustee
🔹 ATO & ASIC compliance support
🔹 Comprehensive tax & accounting services for SMSFs

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If you are considering setting up an SMSF or need advice on trustee structuring, contact Trinity Accounting Practice today. We’ll guide you through the process to ensure your fund is compliant, protected, and optimized for long-term financial success.

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📞 Call us at: 02 9543 6804
📍 Visit us at: 159 Stoney Creek Road Beverly Hills NSW 2209
🌐 Website: www.trinitygroup.com.au
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Disclaimer

The information provided in this article is general in nature and does not constitute financial, legal, or taxation advice. It has been prepared without considering your specific objectives, financial situation, or needs. Before acting on any information contained in this article, you should seek professional advice tailored to your individual circumstances. Trinity Accounting Practice accepts no responsibility for any loss or liability incurred as a result of the information provided.

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🌐 Our Virtual CFO division, VCFO Australia, provides strategic financial management, budgeting,forecasting, and compliance support for growing businesses andnot-for-profits: https://www.vcfoaus.au/

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