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Family SMSFs discussion needs reigniting

A row of shoes from a family along a wall

Conversations around a family SMSF structure are now necessary.

Advisers should view the move to expand the limit on the maximum number of members in an SMSF as a chance to talk about the family SMSF fund structure with clients, according to a sector specialist.

I Love SMSF director Grant Abbott said the proposal by the government to increase the limit on the maximum number of members from four to six announced last week was a “truly seismic shift” and offered a significant opportunity for advisers.

However he revealed advisers are failing to consider suggesting to their clients to bring their children into the SMSF.

“They’re just focusing on the mum and dad. Advisers particularly need something new to go back to the clients for and I think the smarter advisers will go down the track and start to bring more family members into the fund,” Abbott told selfmanagedsuper.

Statistics from the ATO from December 2017 showed as at 30 June 2016, two member funds continued to be the dominant structure of the SMSFs making up 70 per cent of all funds, while SMSFs with a single member accounted for 23 per cent of all funds, while those with three and four members each represented 4 per cent.

“Having a look at those statistics it’s crazy that we’ve got 23 per cent of people with just one member of the fund. It doesn’t make sense,” Abbott said.

He explained family SMSF structures can become intergenerational wealth vehicles provided the fund includes safeguards around voting powers and separate investment strategies.

The reason more advisers are not initiating these conversations is because accountants usually establish SMSFs on the back of conducting the tax work of someone’s business, so they concentrate on the mum and dad in the family trust, while focusing on tax benefits, Abbott said.

“It would never even enter their minds of thinking of putting their children inside the fund or asking the parents where their children’s super is,” he added.

Abbott noted including children in the family SMSF was an opportunity for the children to save money, as establishing their own fund would be cost prohibitive.

“You need to have a couple of hundred thousand dollars in a self-managed super fund but if they can put their money into their parents’ fund or their grandparents’ fund and effectively the grandparents pay for all the administration and audit fees, the kids are actually saving themselves between 1 to 2 per cent per annum,” he said.

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