A Bill has been introduced to Parliament which would raise the maximum number of members an SMSF can have from four to six.
Under the Government’s proposed changes, if they pass, the maximum number of members of SMSFs and small APRA funds would be raised from four to six, from 1 July 2019.
The Government announced the increased SMSF member cap ahead of the 2018/19 Budget, but since then there has not been a public consultation process on the measure.
The Explanatory Memorandum (EM) to the Bill says: “Increasing the allowable size of these funds increases choice and flexibility for members. SMSFs are often used by families as a vehicle for controlling their own superannuation savings and investment strategies. For families with more than four members, currently the only real options are to create two SMSFs (which would incur extra costs) or place their superannuation in a large fund. This change will allow large families to include all their family members in their SMSF.”
The most up-to-date ATO SMSF statistics have 92% of SMSFs having either one or two members, with only 3.5% of SMSFs having three members, and 3.6% having four.
Though SMSFs with individual trustees in some Australian states may not have access to the new member cap. As was noted by some when the measure was announced, including the SMSF Association, increasing the SMSF member cap to six nation-wide would require the trust law of some states to be amended. Instead of this approach, the Government suggests SMSFs could switch to a corporate trustee.
The EM says: “In some instances, the number of individual trustees that a trust can have may be limited to less than five or six trustees by State legislation. Such rules could prevent all members of a fund with five or six members from being individual trustees. In such cases, the members of a fund may consider using a corporate trustee in order for the superannuation fund to meet, or continue to meet, the amended definition of an SMSF.”
The EM also says that the Bill “partially implements the measure”, with the remainder requiring regulations.
The change is contained in the Treasury Laws Amendment (2019 Measures No. 1) Bill 2019. The Bill was was introduced and debate adjourned, as is standard practices for newly introduced Bills.
The Bill may not make it through the Parliament before an expected May election – after this week there are only two Senate sitting days scheduled before May. Thought there is provision in the Bill to move the start date if the changes haven’t received Royal Asset by 1 July 2019.
More to come.