SMSF advisers must get on the front foot in relation to the opportunities for their clients’ family SMSF strategies arising from the federal government’s budget measure to increase the number of members allowed in a fund, an SMSF expert has said.
Last night’s budget confirmed the maximum number of members in an SMSF will rise from four to six from 1 July 2019.
“The government has finally made a gentle push for more of us to use SMSFs by opening up the boundaries and increasing the maximum number of SMSF members,” I Love SMSF director Grant Abbott said during a post-budget SMSF webinar today.
“This [in turn] starts to open up the possibilities for SMSF strategy.
“So you need to be part of the early adopters and go out talking to your clients about family SMSFs before they hear about it from someone else.”
Abbott said advisers need to inform their clients of the measure sooner rather than later.
“You need to ensure they know it’s no longer about just having a ‘common’ SMSF anymore because there’s been a recent change [after last night’s budget],” he said.
“Once you start to open it up to more members, it means it’s not about one strategy, but there’s now a whole raft of strategies available all for the benefit of the family – to reduce the tax payable by the family group and, more importantly, to maximise the wealth of not only this generation but the next generation and the generation thereafter.
“So are you one of the early adopters or are you one of the laggards?”
He said getting more people into the SMSF was the adviser’s responsibility.
“There have been a lot of naysayers when it comes to family super, but at the end of the day it’s really up to the client to decide if they prefer a ‘common’ SMSF or a family SMSF,” he noted.
“I think if you ask your clients what’s most important to them, family certainly comes up as a top three answer, so all the different strategies we can use for family SMSFs means advisers need to get their goggles on.
“The reason why a lot of family SMSFs haven’t been set up is because when I first mentioned the idea of increasing the members in a fund in 2004, there was only $132 billion sitting in SMSFs and during those days it was the early start of the baby boomer generation who were using their money to build their SMSFs and some of them have now done extremely well with the bull markets and franking credits.”
But this will fundamentally change at some point in time, particularly if Labor wins the next election, as one of its policies is to scrap the excess imputation credit refunds, he warned.
Additionally, a benefit of the new measure is that it will be easy for clients to comprehend.
“If you spoke to your client and asked them: ‘What is a family SMSF or family super fund?’, in a heartbeat they’re going to know the answer – it’s a fund for their family,” Abbott said.
“And then they’ll ask you how many members of their family they can get in the fund. They’ll grasp that easily.
“And the SMSF will, what does that mean to them? It’s another one they’ll grasp easily.”