“Firstly, it makes it easier to run and to change trustees as people come and go. It means it’s really clear what assets are owned by the fund, and doesn’t get them messed up with other assets. It satisfies the rules to keep things separate,” he said.

“Also, if you have a trustee company that is just a trustee of your SMSF, you get a lower annual return fee with ASIC which in May 2024, for a special purpose super trustee company, was $63 as opposed to $310 for a normal private company.”

He continued that for a company to qualify as a special purpose superannuation trustee company the two conditions that must be met are that the only purpose of the company is to act as the trustee of the fund and that the constitution of the company must contain some special rules.

“The first condition - that for the company to qualify it must only act as trustee of that superannuation fund including an SMSF – also requires that the fund be a regulated superannuation fund,” he said.

“That means you have to have made that formal election to the tax office back at the very beginning when the fund was set up. The company can only act as trustee of the fund and it can’t be the trustee of a bear trust, as that doesn’t qualify as a special purpose super trustee company. It also can’t act as a trustee of a family trust, nor can it be a corporate beneficiary, or run a business.”

He continued that the company constitution for a special purpose super trustee company must have a special provision that specifically prohibits distributions of the income or capital of the company to the shareholders, except in a couple of small exceptions that don’t normally apply.

“To make sure your company is going to qualify, you need to read the constitution and find that specific provision. A general provision that says the company can act as a trustee of an SMSF is not going to be enough,” he said.

“The other thing to do is that if you’ve got that provision in, your company can’t act as anything else, it’s just not practical which means you can’t use it as a distribution recipient from family trusts or to carry on businesses because you can’t pay your dividends out and that’s going to be a problem.”

Hay-Bartlem said it is possible to change a company to a special purpose super trustee company via an amendment to the constitution.

“If you haven’t got that specific provision in the constitution you will need to change it and add it in and then register with ASIC giving them a declaration which goes through the rules, and says that it’s solely the trustee of a superannuation fund and you’ve got those provisions in your constitution,” he said.

“Before doing that,you’ll need to make sure there’s nothing else left. For example, if you’re using an old company, there’s always a risk that once you put the provision in your company constitution, you won’t be able to pay out any assets you find or any later retained profits you might discover.”