The Government plans to increase the maximum number of members an SMSF can have from four to six, and extend SuperStream to SMSF rollovers.
Minister for Revenue and Financial Services Kelly O’Dwyer, speaking at the inaugural SMSF expo, said the Government appreciates the role SMSFs play in increasing competition in the super sector and the opportunity they give members to take a more active approach in their superannuation.
“That’s why today I am thrilled to announce that as part of the upcoming Budget, we will expand the limit on the maximum number of members in an SMSF from four to six,” said Minister O’Dwyer.
“This change will allow for greater flexibility and, given the growth in the sector to date, will ensure SMSFs remain compelling retirement savings vehicles into the future.”
In 2015/16 – the most recent year for which the ATO has published statistics – only 3.7% of SMSFs had four members. Existing trust law in at least some States may also cause issues with increasing the number of individual trustees of an SMSF.
It is unclear from the speech if the maximum number of members of a small APRA fund – four – will be increased.
Update: This measure has been included in the 2018/19 Budget, which confirms that the member cap for small APRA funds will also be increased.
The Government also intends to extend SuperStream to include SMSF rollovers.
“This reform will allow SMSF members to initiate and receive rollovers electronically between an APRA fund and their SMSF,” said Minister O’Dwyer.
“This will reduce compliance costs, expedite the rollover process and further improve the integrity of the super system.”
“I have asked the ATO to work with industry on the design and implementation of this important reform, which is expected to commence late next year.”
The Government is planning more “positive” superannuation announcements for Budget night, Minister O’Dwyer said, but there is no intention of “making any further changes to the taxation of super”.
Minister O’Dwyer also used the speech to apologise for not starting the banking Royal Commission sooner. This comes after an interview on ABC’s Insiders on Sunday where the Minister repeatedly refused to answer if the Government was wrong to oppose setting up a banking Royal Commission.
“With the benefit of hindsight we should have called it earlier, I am sorry we didn’t, and I regret not saying this when asked earlier this week,” Minister O’Dwyer said in her speech.
“The Government did get the timing wrong.”
SMSF Association welcomes increased member cap
The SMSF Association has welcome both of the announced SMSF changes, for which the Association had been lobbying for more than five years according to CEO John Maroney. He said the changes will prove “extremely beneficial” to the SMSF sector by reducing red tape.
“Expanding the definition of an SMSF from a fund with a maximum of four to six members will provide greater flexibility in how SMSFs can be structured,” Mr Maroney said.
“This will especially benefit family groups who want to include parents and their children (and potentially their children’s spouses) in a single SMSF.”
“Currently, family groups may need to have multiple SMSFs to accommodate more than four members, so this proposal will allow a single SMSF for the group, bringing the benefits of reduced costs and greater scale.”
Maroney said that changes would be needed to the trust law in some States to allow more than four trustees of an SMSF. Though he noted this was not relevant if SMSFs have a corporate trustee.
Also, the inclusion of SMSF rollovers in SuperStream will be a “significant improvement” to the system.
“This change to the mechanics of the super system is important to SMSFs. Currently, SMSFs can experience lengthy delays in receiving rollovers from large superannuation funds, so this change will ensure rollovers are made in a timely manner, enhancing choice and efficiency in the superannuation system.
“This will minimise friction between various parts of the super system and also reduce the time it takes for SMSF members to access their retirement savings held in large funds.”
Maroney said the SMSF Association ” awaits with interest” the further positive announcements for superannuation and SMSFs in the Budget.