How to change from an individual trustee to a corporate trustee

SMSF technical expert and columnist for The Australian newspaper
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Changing from individual SMSF trustees to a corporate trustee isn’t difficult work, although it can be a little time consuming.

It needs to be approached with a reasonable attention to detail, because it’s easy to miss steps or make mistakes.

The process will cost your fund money. The total costs will depend on how much of the work you’re prepared to do yourself and how much you prefer, or need, to rely on other people, such as lawyers and SMSF administrators. If your fund owns real estate or has a Limited Recourse Borrowing Arrangement (LRBA) in place, then you will need to use a solicitor to draft some transfer documents and lodge them with State/Territory revenue offices and your Land Titles office.

Changing from individual to corporate trustees involves two issues – legally changing the trustee and then changing the ownership of all fund assets.

Before you follow these steps, you might need to set up a company to act as your SMSF’s trustee. You can do this work yourself or your SMSF administrator should be able to help you. All the members of your SMSF have to be a director of this company. ASIC allows you to set up a special purpose company, which has a much lower annual supervisory fee.

Legally changing the trustee

Your trust deed needs to be carefully reviewed to determine how the change from individual trustees to the corporate trustee will take place.

In most cases, you will need a lawyer to draft one document, which causes the individual trustees to resign and another document appointing the corporate trustee as the replacement director.

Having executed these documents, you then need to make sure the Tax Office is notified about the change in trustees (they’ll want to know details about the company trustee directors).

If relevant, each director will need to sign the ATO Trustee Declaration (if they haven’t done this already).

Changing the trustee on assets

Once the trustee has been altered, you can then begin the process of changing the trustee on your fund’s assets:

1. Bank accounts

All banks will want a copy of the change of trustee documentation. Some will want to see the original whilst others will be happy with a certified copy.

Some banks will change the owner of an account. Other banks (often because of computer system limitations) will insist that the old account be closed and a new account be opened. Some banks will transfer all automated direct debits and credits set up in the original account to the corporate trustee one, whilst others leave this to you.

2. ASX listed securities

There are two distinct processes here:

  • Issuer sponsored securities – every share registry will allow an off market transfer to the new trustee. They charge a small fee for this service (most charge about $50 to change the name for all your security holdings that are registered with them).
  • Broker sponsored securities – full service brokers will change the trustee but will charge a fee.

With all other brokers (for example online brokers) you typically have to create a new account in the name of the corporate trustee and then transfer all holdings across to that account. Many of these brokers charge a fee for each shareholding. An alternative approach is to close the broker account. This means that your shares will become issuer sponsored. You can then follow the process mentioned above.

Once the change of trustee has been finalised, you could then open a new broking account and transfer all your shareholdings into it. Most brokers will help you with this step.

3. Real estate

The process in each State and Territory is slightly different. For real estate, you will need a solicitor to prepare relevant paper work. The following is how the process typically works:

  • You ensure your change of trustee document is stamped by your State/Territory revenue office.
  • The transfer of ownership form is completed and stamped as required (in most cases no stamp duty will apply).
  • The transfer of ownership form is lodged with the Titles Office.

4. Term deposits

A few banks are very flexible and will allow a change of ownership. Unfortunately most banks are very inflexible. They will insist that you stop your existing term deposit and commence a new one. In some cases, they will enforce the termination penalty and offer you prevailing market rates even when these are lower than the original rate.

If you terminate a term deposit, then some banks will insist that any interest payable has to be deposited into a bank account in the name of the individual trustees (which means you might need to keep that account open until this job is finished).

5. Managed funds

There are two options here:

  • Held directly – each fund manager needs to be asked what their specific requirements are; most will demand their change of ownership form be completed and that you provide a certified copy of change of trustee document.
  • Held via a wrap administration platform – your wrap account is a type of custodian so a simple request to your wrap account administrator should be all that is required; you will need to check with your administration platform to find out their specific requirements.

Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.

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