News & Information
2018 Budget Proposals: Increase to Number of SMSF Members
The 2018 Federal Budget announcement on 8 May 2018 introduced a few key changes where Self-Managed Super Funds (SMSFs) are concered, one of them being the increase in the number of SMSF members.
Currently the maximum number of members a SMSF is able to have is four, with many SMSFs having only one or two members.
According to the Australian Taxation Office Self-Manged Super Fund Quarterly Statistical Report of December 2017 in 2015/16, 3.7% of all SMSFs had four members while 3.6% of all SMSFs had three members. What this means in terms of numbers is that of 568,315 Self Manged Super Funds at 30 June 2016, 21,027 had four members and 20,459 had three members.
At the present moment, those SMSFs that have three to four members were established so family members could be a part of the same SMSF, for example a husband, wife and their two children. But also, to pool superannuation monies to puchase a large asset, such as property.
The main benefit to increasing the number of members in a Self Managed Super Fund is to allow families with more than four members to all participate in the same fund by pooling all their monies together. We have seen a continous decrease in concessional (Deductible) and non-concessional contribution (Non Deductible) caps over the past few finanical years. This gradual decrease has the potential to affect an SMSF’s ability to purchase larger assets.
Another added benefit to increasing the number of members of an SMSF is the proportionally lower cost paid by each fund member. There are certain fixed costs in an SMSF which cannot be avoided such as the requirement of an annual audit, however combining superannuation monies into one SMSF fund reduces the cost of running separate accounts for the members.
If the decision is made to add an additional memebr to an SMSF, it is recommended this is done with careful consideration. Issues to consider include;
- If a child is to be invited into the fund, bear in mind the complexity of removing a member in the future.
- The long term potential of divorce/separation resulting in potential splitting of assets including property and
- Estate planning should all be taken into account.
Moreover, the increase in the number of members in an SMSF does not come without potential difficulties. The addition of new members means that there will be more opinions on investment choices and who has control over access to each invesment, for example online banking. Each member of the SMSF must be in agreeance when a decision is made. This can lead to disputes given the complexity of the decisions required from time to time. Furthermore, estate planning in the event of a member’s death should also be well covered to avoid any possible disputes.
If this proposal is finalised as a law, SMSF deeds and constitutions will need to be reviewed and updated. In the event this becomes a law and you are considering adding an additional member to your SMSF, considering speaking with a SMSF specialist.
LifeTime Financial Group are specialist (holding appropriate accreditations) advisors who are ideally positioned to assist you in selecting and then managing your retirement funds.
Would you like to discuss your personal position further with one of our highly qualified financial planners? Why not call us today on 03 9596-7733.
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Written by Anthony Stedman of LifeTime Financial Group. A leading privately owned Melbourne Financial Planning practice.