An SMSF expert has questioned whether the federal government’s proposal to increase the maximum number of allowable members into an SMSF is a “knee-jerk” reaction to Labor’s franking dividend policy.
Smarter SMSF founder and chief executive Aaron Dunn said in a post-budget podcast that while the measure allows larger families to ultimately incorporate their children into their SMSF, the reality is the average number of members in an SMSF is around 1.9.
“Therefore the real question is, is this really as a result of consultation or is this simply a knee-jerk reaction to what was Labor’s policy around the decision to ban the franking credit refunds?” Dunn said.
He observed there had been consultation over many years, including around the period of the Cooper review where the issue was raised and it was deemed at that stage it was unnecessary to change the number of members in an SMSF.
“So to me it does appear like it has that real flavour of knee-jerk lack of consultation and just making a decision off the back of what the Labor government proposed to impact the SMSFs,” he said.
“But in saying that I’ll take it because I think it does provide further opportunities to consider some of the things that can be done inside an SMSF when we think about estate planning, we think about the way in which the investment strategy may be constructed and provide greater longevity in the way in which the SMSF can operate.”
BGL Corporate Solutions managing director Ron Lesh said he favoured the SMSF member limit increasing from four to six from 1 July 2019.
“For me, with five kids, I can now bring more of my kids into my SMSF to use any additional franking credits generated through tax paid by companies in which I have invested. This will give me some protection if Australia elects a Labor government at the next election and this dumb policy is enacted,” Lesh said.
I Love SMSF founded Grant Abbott recently told selfmanagedsuper a key strategy to circumvent the scrapping of the cashbacks is to keep it in the family by gifting the credits to any children in the SMSF.
“Franking credits generated on the pension side and utilised by the children will reduce their contributions tax, and the children’s side of the fund would then pay for the use of franking credits,” Abbott said.