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Yes, it is possible to set up a single member SMSF. Although, there are a number of rules and requirements which must be met in order for a single member fund to be considered a compliant single member SMSF. It is important if you are considering establishing one, that you seek financial and legal advice at the outset.

Most notably, single member funds have the following trustee requirements:

• a corporate trustee; or
• two individual trustees.

Corporate trustee 

For single member SMSFs with a corporate trustee structure:

1. the member must be the sole director of the corporate trustee, or alternatively;
2. the member must be one of two directors (not more). In the case of two directors, the non-member director must be:

           (a)    related to the other director; or
           (b)    not an employer of the other director.

All directors must have a director ID. 

Individual trustees

For single member SMSFs with individual trustees:

1. there must be two trustees;
2. the member must be one of the trustees;
3. the non-member trustee must either be:

          (a)    related to the other director; or
          (b)    not an employer of the other director.

It is important to plan for a variety of events when establishing and running your single member SMSF.  Not only should you give thought to which structure suits your circumstances best but also, in the case of a single member SMSF, you will need to think carefully about the following:

1. in an individual trustee arrangement, who should be the non-member trustee?
2. in a corporate trustee arrangement, should you remain a sole director company or bring in a second director to the corporate trustee and if so, who?

Other important issues to consider include planning for events such as death, incapacity and the possibility of a falling out between trustees or directors.

For example, what will happen when the member of a single member SMSF dies? This requires careful planning from a number of perspectives, including in terms of the death benefit payable as a result of the member’s death and the control of the SMSF. Then there is also consideration to be afforded to what happens when a trustee or director dies.  

Taking a step back from death, it is also important to plan for what will happen to the control of a single member SMSF in circumstances where the sole member or a trustee/director of the corporate trustee loses capacity to make decisions.  

Sometimes in the case of either two directors or two individual trustees, a falling out may occur and having an SMSF designed to deal with this situation is crucial.  

Giving careful consideration to the issues above, not only when establishing the single member SMSF but also, as life events occur and circumstances change, will allow the best chance for your SMSF to operate smoothly. This is where good financial and legal advice can be helpful in ensuring that your single member SMSF can weather a whole host of life events and provide peace of mind.

If you would like to discuss the issues raised in this article or SMSFs generally, please contact Rebecca Edwards, Senior Associate SMSF Specialist Advisor^TM.