The take-up of six-member SMSFs has been limited but appears to currently be attracting families with the intention of using them to acquire and develop capital intense property, according to a technical expert.
BT technical services technical consultant Tim Howard said while some six-member funds have been created to ensure the central management and control of an SMSF remains in Australia during the time its members are overseas, more interest is being expressed as to how they can be used to access larger investments.
“From our conversations around bringing in younger members where this is a high net worth family, they either want the kids to be a part of that investment or to benefit from that investment,” Howard told selfmanagedsuper.
“Most of the time the adult kids won’t have the same capital as the parents but they still have their own superannuation elsewhere and might be rolling some of it into their parent’s fund, [so] as a family group [they] have more capital to either invest into projects or access larger investments.
“Those conversations tend to be around property and property development and getting the benefit to the kids as well and not so much around being part of a large managed portfolio of direct shares, managed funds, ETFs (exchange traded funds).”
Howard pointed out property discussions are often related to someone in the family being involved in property development or land acquisition and division, and looking to use superannuation to help access the capital needed to carry out a project.
Further he noted reports of some six-member SMSFs also being used by business partners to purchase and develop property but had not dealt with anyone looking to do so, adding a unit trust structure would be a better vehicle for unrelated parties to execute these projects.
“What you tend to find when you have more than two partners going into one investment is they will all have their own SMSF and then they will invest in a unit trust together and put the assets in that trust.
“This separates everyone’s SMSF and from a control point of view and from an estate planning point of view as everyone runs their own fund.
“If you have business partners coming and going the new business partner buys the existing units of the unit trust from the equity partner, so there’s more operating efficiencies and estate planning and control issues are removed from the equation.”
