Changing Trustee for SMSF

Hi Dr Lobster,

Did you succeed in changing to a Corporate Trustee? I want to do the same thing and would be interested to know the answer to your original question. ie how to change over. Did you have to wind up and restart? and did you have to get a new Trust Deed? or update the Trust Deed? and who does the upgrade? ie accountant, lawyer or trustee.

There's plenty of info on this forum and elsewhere on the pros and cons, I just want to find out about the "how to", and any information about that would be greatly appreciated.

Cheers,
Davewa

 

Hi Davewa
changing a trustee of a superfund is not difficult
the process to change all of the investments to thenew name is the tedious & often frustrating task

The deed may need to be updated

No need to stop or restart the SMSF

We do it in conjuction with advice & drafting from our SMSF lawyers as it is a legal document and Accountants should not prepare such docs

cheers
Nickm

 

Thanks Nickm,

Fortunately we're currently 100% in cash, so re-registering the assets is just limited to bank accounts.

Regards,
Davewa

 

Actually my fellow trustee thinks that it would be cheaper to open a totally new SMSF (with Corporate Trustee), roll over the funds from the old SMSF (with Individual Trustees), then close down the old SMSF.

What do other readers think when compared with changing the SMSF? Especially as in our case there are currently no property or shares in our SMSF.

Regards,
Davewa

 

not even close. NEw smsf requires new deed, new ABN & TFN applications not to mention the cost of closing down the old fund, ytd financials, rollovers etc

it is not difficult to change a trustee if you do it right

If it is all in cash it should be straightforward depending on your bank.

MInd you in some cases once the deed / trustee has changed it is easier to open a new bank acct then simply transfer all the cash over to the new account rather than try and deal with legals in a bank to change the name on the account

 

The following comments apply if there are no concerns about the fund having to pay tax upon any capital gain event which might arise, and where a fund is in accumulation phase (not paying a pension).

There are two ways to achieve a change from individual trustees to a corporate trustee.

First way: keep the existing fund with its existing TFN and ABN but change the structure from individual trustees to corporate trustee. Exactly how this is done (in terms of paperwork) will depend on the terms of the existing trust deed but it is usually very simple. There might be other work to do, for example in a more complicated arrangement the outgoing trustees might require indemnities from the incoming trustee: in a simple fund this would not be necessary.

When changing the structure in this way, in my opinion it is best to use an entirely new trust deed. Some trust deeds try to use the same wording for both individual trustees and for corporate trustees, and in theory this makes the transition cheaper (no new trust deed needs to be purchased and only the trustee would need to be changed). But I think such deeds lack in precision, clarity and consistency. And the wording required by the legislation for each type of structure is different so there is a danger that this is not done correctly.

Second way: start an entirely new fund, register it with the ATO and get a new TFN and ABN for it. It is really not difficult to do this, and one advantage is that you can time the transfer of assets into the new fund to suit the nature of the investments. For example you might have a term deposit which you are waiting to mature. This can be done because there is no reason why you can't be a member of two SMSFs at the same time. You would have two lots of accountants' and auditors' fees for a while.

Of course in both cases a company needs to be set up, and preferably this should be a special purpose company to save on ASIC annual fees. There should be no inconsistencies between the constitution of the company and the corporate trust deed so they should come from the same source.

Either way, the assets need to be transferred from the individual trustees to the corporate trustee. They could be transferred in specie (not converted into cash first and then transferred) provided the old and new trust deeds permit.

And either way, new Trustees' Declarations need to be made and filed with the SMSF documents, and of course the ATO needs to be informed of the changes.

 

Thanks NickM,

Yeah that's what I thought too. But my fellow trustee still worries that changing to a Corporate Trustee may involve extra expenses or hassles at tax return time.
For example some accountants are wary to take on annual tax calculations for old SMSFs in case they're taking on a mess, especially as we've just had 1 accountant retire on us, plus 2 interstate moves and we need a new accountant and auditor anyway. Actually our accounts are very simple since we're 100% cash, and our assets are completely segregated (I'm in pension phase), and we are careful to comply with rules. Trust deed is reasonably new (received 2008). Can't get much simpler than that, but I understand why accountants are wary.

So does anyone foresee any such difficulties when moving to Corporate Trustee?

Cheers,
Davewa

 

Thanks Jorgan - that helps clarify several things.

I was as you say, hoping to time the deal to coincide with my term deposit maturity. But couldn't this also be done with what you named the "First Way"? I mean lets say I go according to the First Way just before the term deposit matures, then collect my funds at maturity say as a bank cheque, take it to another bank, along with the Corporate SMSF paperwork and deposit it? Maybe there is some banking formality stopping me from doing that?

Regards,
Davewa

 

Change to Corporate Trustee

Hi Davewa,

I read this thread and see that it seems not too hard. Did you figure out all the small details? If so could you let me know since we're hoping to do the same thing.

Regards,
Greg999

 

Hi Jorgon,

Thanks for your helpful reply.

But can I ask - What happens if one member is already in Pension phase?

Cheers,
Greg999

 

Hi Greg999

I excluded a fund in pension phase from my comments because of the complexities which arise in this area.

The main concern when transferring assets in pension phase is to make sure that the changes do not trigger liability for tax on gains where no such liability would otherwise exist at all (as would apply in respect of the assets set aside to pay the member's pension).
This question is less important when in accumulation phase (although it may well still be important) because if there is a CGT event on the transfer of assets, this merely brings forward the time when the tax has to be paid, rather than causing a tax liability where none exists.

Some of the relevant tax laws were changed on 24 March 2010. The change to subdivision 104-E of the Income Tax Assessment Act 1997 made it clear that a mere change of trustees for the same trust (the "first way" above) is not a CGT event.

The previous trust clone provisions were also repealed and replaced with a new rollover relief when transferring assets from one trust to another (subdivision 126-G). It remains to be seen whether this new rollover relief applies to superannuation funds, but there would appear to be no reason why it should not apply. The asset transfer would need to be timed correctly, each trust would need to have the same members, the trust deeds must not have significant discretionary elements, and the relevant election to rely on the rollover provisions must be made. If the rollover relief applies, it would have the effect of deferring any CGT consequences when using the "second way".

However, some advisers are of the view that if a fund is in pension phase then any transfer to another fund of the assets used to support that pension is a CGT event resulting in a tax liability. It is said that this is because you can't transfer such assets without ending the pension first, or you can't transfer the assets in separate parts (only in one go). When I last looked at this, I did not agree with this view (subject of course to any restrictions in the trust deed itself, and provided the type of pension did not change).

Because of these different views it may be wise to obtain a definite opinion from an accountant or tax lawyer specialising in this area, or an ATO ruling in advance of any decision.

Please do not rely on the above - if you do so, it is at your own risk.

 

Thanks for your reply Jorgan,

I can see how a CGT event on shares, etc could be triggered by your "Second Way" (ie new fund), but how about your First way: ie "keep the existing fund with its existing TFN and ABN but change the structure from individual trustees to corporate trustee." Is it possible that could trigger such a CGT event?

Also what if the member in the Pension Phase is 100% in cash? Presumably no CGT event would apply to her?

I mean aren't you really saying here for funds in Pension Phase to go with your First Way?

Cheers,
Greg999