Did you know there are 539,375 Self Managed Superannuation Funds (SMSFs) currently in existence?*
33,340 new SMSFs were established last financial year, forecasted to grow by another 35,000 this financial year. If you too are looking to create your own Self Made Secure FutureTM through an SMSF, here are some practical tips you should consider.
- What’s in a name?
When naming an SMSF, there are basically no restrictions on what name you can choose. As a guiding rule though, the shorter the name, the better.
For example, it is perfectly allowable for an SMSF to be called ‘The John Smith Family Executive Superannuation Fund’.
However, that name will need to fit on bank statements in respect of bank accounts that could have significant dollars in them! With many bank computer systems not allowing such a long name, they will truncate the name instead. Accordingly, that can create uncertainty as to the true name of the SMSF, or even create uncertainty as to whether there are multiple SMSFs!
- Avoid Numbers
One of the most elite units in the US armed forces was originally called ‘SEAL Team Six’. Although there were only two SEAL units at the time, the name was chosen to confuse the Soviets. This naming strategy might have been a good idea during the cold war, but may not be true when naming SMSFs.
For the purpose of asset protection and other reasons, it can make sense to have multiple SMSFs. There is a temptation to put numbers in names, such as calling the second SMSF ‘Smith Super Fund No 2’, the third SMSF ‘Smith Super Fund No 3’, and so on.
However, imagine if a tenant of the Smith’s commercial property in the second or third super fund sues the landlord (ie, the SMSF trustee). If the name of the SMSF is ever disclosed to the tenant, it starts to suggest that there are other SMSFs with other assets (ie, that the plaintiff might have found a wealthy defendant).
- Sole purpose corporate trustees right from the start
Some people adopt the view that it’s too expensive to use a corporate trustee at the start when the SMSF might not be comparatively large yet.
However, there is a certain advantage in having a corporate trustee right from day one; you don’t have to make any changes later to the trustee structure. While obvious, the benefit is larger than many realise. The documentation necessary to change a trustee is legal documentation and a lot of people incorrectly prepare it. Even lawyers might incorrectly prepare it.
Consider the case of Moss Super Pty Ltd v Hayne  VSC 158. This case involved an SMSF that had had a change of trustee. The validity of the appointment of a new trustee was challenged on the basis that the existing deed required that a certain person sign the appointment documentation in one capacity and not in the capacity that that person actually did sign.
Byrne J held that the challenge identified a legitimate flaw in the purported change of trustee and accordingly the entity that thought it was the new trustee was not.
If, however, a company that was registered for the sole purpose of being a trustee is used right from the SMSF’s commencement, odds are no change of trustee will ever be needed, and thus there is no opportunity to make any mistakes.
- Naming corporate trustees
Again, shorter is better and avoid numbers. Unlike SMSFs, each company must have a unique name and certain words are effectively banned from company names. The two most common banned words from company names that people want to use are ‘Trust’ and ‘Trustee’.
However, the word ‘Super’ is allowable. Accordingly, we recommend a name like ‘Smith Super Pty Ltd. That being said, because company names must be unique, that exact name typically will not be available and something like ‘J&MS Pty Ltd’ could be used instead.
If you are ready to take control of your super through an SMSF, contact your local Crowe Horwath advisor. These tips were provided by Crowe Horwath’s SMSF trust deed provider, DBA Lawyers.
*Figures as at Sept 2014 – ATO Quarterly Report. Find out more by clicking here.
This is for general information only. Any advice in this article has been prepared without taking into account your objectives, financial situation or needs. You should therefore not act on it without first taking those things into account and seeking professional advice. Crowe Horwath Financial Advice Pty Ltd ABN 51 060 092 631 | AFSL 238244.