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SMSFs
www.fssuper.com.au Volume 13 Issue 03 | 2021
CPD Earn CPD hours by completing the assessment quiz for this article via FS Aspire CPD. Worth a read because: Before increasing member numbers up to six, SMSF trustees need to understand the implications for the fund decision-making and administration. For instance: Is the current trustee structure suitable? How will voting rights be determined? Will investment strategies change? Visit www.financialstandard.com.au and click ‘FS Aspire CPD’ in the menu or call 1300 884 434 to gain access to the platform.
Six member SMSFs They sound like a sensible idea
S Graeme Colley
ix member SMSF funds sound like a sensible idea. Put the family in one super fund, make joint investment decisions, help the children save and heaps more reasons. Why not? The Treasury Laws Amendment (Self Managed Superannuation Funds) Bill 2020 (the Bill), was introduced in the Senate on 2 September 2020. It remains before the Senate although the Senate Economics Legislation Committee has recommended it be passed (albeit with the Labor senators issuing a dissenting report). [It has since received Royal Assent]. Among other things, the Bill proposes to amend section 17A(1) (a) of the Superannuation Industry (Supervision) Act 1993 (SIS Act) to require an SMSF to have fewer than seven members (instead of fewer than five) in order to satisfy the definition of an SMSF. Besides allowing SMSFs to have up to six members, the main change that will occur relates to the signing of a document which will require at least half of the trustees or directors of the trustee company to sign certain fund and regulatory documents. The Bill also standardises the wording used in the SIS legislation so that reference to small funds is consistent. The best advice about the family SMSF is to ‘look before you leap’, make sure you have done your homework and have concrete reasons for the final decision. Do not forget that if you do not get it right, you
THE JOURNAL OF SUPERANNUATION MANAGEMENT•
and maybe the rest of the family may end up with no safety net and a big mess.
What needs to be done? • Understand the impact of the increase in SMSF members on decision-making and fund administration. • Appreciate the difficulties that can arise by the increase in SMSF members on investments and benefit payments. • Recognise the benefits of increasing SMSF members from a wealth transfer angle. Experience shows that the decision to include family members as part of an SMSF can work well, but only in a limited number of cases. If everyone understands the purpose of superannuation, their responsibilities, and respects each other’s views, then it can work without any question. However, issues can arise when there are differences in members’ ages, and younger family members may lack interest and skills compared to their parents who may be close to retirement. There is also the potential difference in investment choices by members as younger members may have longer investment time horizons than their parents. With those basics in mind, let us have a look at the essential technical requirements of having an SMSF. The most essential requirement for an SMSF is that, under the current rules, you cannot have any more than four members but if
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