There are a number of reasons why you should make the decision to appoint a special purpose company as a trustee of your SMSF, but what exactly needs to happen?
There are two main areas that need to be addressed as part of the change:
1. The legal change
2. Investment name changes
The legal change
Changing the trustee of a SMSF must be completed with the oversight of a legal practitioner. It involves the detailed review of the clauses or rules of the SMSF trust deed to determine exactly how a new company trustee must be appointed.
A new special purpose company needs to be registered with the Australian Securities & Investments Commission and all members of the SMSF have to be directors of the company. Special purpose companies that will only act as trustee of a SMSF pay reduced annual registration fees. It is not recommended that an existing company be used as trustee.
A legal document will be prepared to firstly appoint the newly formed company as a new trustee of the SMSF and secondly remove the existing individual trustees. This document will need to be correctly executed by all members of the SMSF for the change of trustee to be valid.
It is also recommended that the existing SMSF trust deed is amended / upgraded after the appointment of the new company trustee. This ensures the SMSF is up to date with any changes to superannuation laws and new strategies that may be available.
From a practical sense it also means that there is one document containing the details of the SMSF and the new company trustee â€” rather than the trust deed with the old trustees and a separate document outlining the change to the new company trustee.
Investment name changes
Superannuation laws require any accounts and investments owned by the SMSF to be recorded in the name of the trustee(s) of the fund. When the trustee changes, then the name recorded on the investment accounts also needs to be changed.
John Smith & Jane Smith as trustees for (ATF) Smith Family Super Fund
would need to change to
Smith Super Pty Ltd ATF Smith Family Super Fund
What needs to happen in a practical sense will be determined by the actual investments and accounts held by the SMSF. The following is a brief guide of what to expect.
In almost all cases your bank will need to be provided with either originals or certified copies of the change of trustee documentation.
Some banks will require a new account to be established and will get you to complete an entirely new application form and will issue a new account number. Depending on the bank they may assist you with this process and link the account number of the new account to the old account number so any deposits / direct debits will be moved to the new account.
Some banks and credit unions have more flexibility and will enable the name to be changed on an existing account. Macquarie and Bank of Queensland for example will do this when provided with a copy of the change of trustee documentation.
Tip: Phone your bank or check their website to determine what needs to happen to get your SMSF account into the correct name.
Tip: Take the opportunity to review the bank accounts you are using within your SMSF and see whether you can reduce the number of accounts to make the management and administration easier.
Most banks will not enable you to change the name on a term deposit without breaking the deposit and placing a new deposit. It is suggested that any term deposits in the name of the individual trustees be left to mature and any re-investments be made in the name of the corporate trustee.
Where the maturity date of any existing term deposits is after the end of the financial year, an additional declaration may be requested from the auditors of the SMSF to ensure that there is no debate on the beneficial owner of the deposit â€” especially when the name of the actual SMSF is not recorded.
Some Banks will also require one account to remain in the name of the individual trustees for the payment of the interest and principal on maturity.
Listed Shares / Broker Accounts
Where there is a broker (CHESS Sponsor) attached to your shareholdings, you have a few options in regards to how you go about transferring the shareholdings into the correct name.
Most traditional ‘full service’ stockbrokers will action the transfers on your behalf. They may charge additional fees for this service.
If you are using an online broker such as Commsec it is possible to transfer all shareholdings from the existing account (in the name of the individual trustees) to a new account (in the name of the corporate trustee) however there will be a fee attached to each share transfer ($54 for Commsec). This option becomes expensive if you have a significant number of shareholdings to be transferred.
It is possible to simply close your broker account. This will trigger the removal of the CHESS Sponsor (broker) and the share registries will issue new holding statements with an SRN (Security Holder Reference Number) â€” i.e. the shares will become ‘issuer sponsored’.
Once the shares are issuer sponsored, they can be transferred via an off-market transfer form to the name of the new trustee company. The share registries will charge a small fee – $50 for Computershare and $55 for Link Market Services to process all transfers (regardless of the number of holdings).
Once this transfer is complete your shares will be in the correct name and can be transferred to a broker using an ‘Issuer to Chess’ conversion form. Many brokers enable this conversion for free.
Tip: Take the opportunity to review your SMSF portfolio and dispose of any non-performing shares prior to
undertaking transfers to minimise transfer fees.
Managed funds held under a wrap account are easy to transfer into the correct name as the wrap account acts as the custodian, so a request to the wrap account provider via your adviser enables the name change.
Where managed funds are owned directly (not via a wrap account), each managed fund provider will need to be contacted and they will provide specific instructions on how to transfer the units. In most cases a transfer form accompanied by a certified copy of the change of trustee documents will be required.
Unfortunately some managed funds will require stamp duty to be assessed and paid on the transfers.
Tip: Review the managed fund investments with your financial adviser to determine whether they are still suitable for your portfolio or whether the opportunity should be taken to sell the units and invest the proceeds elsewhere.
The process for transferring property from the names of the individual trustees to the new corporate trustee will vary depending on the State the property is located in; however the following steps are typical:
1. The change of trustee document should be stamped by the relevant state revenue office.
2. Transfer for with the title office completed and also stamped with any required declarations completed (in most cases there should be $0 stamp duty on the transfer).
3. Stamped transfer forms provided to the titles offic and the applicable transfer fees paid.
Tip: Engage a solicitor to undertake the forms and work required for the transfer to save you time and potential aggravation as revenue and titles offices can be extremely specific with their requirements.
Superfund Partners are experts at assisting you in making the change from individual trustees to a special purpose corporate trustee. If you would like to speak to us about how to make the change, please contact us to discuss.