The 2018 budget measure increasing the maximum number of members in an SMSF from four to six will help improve the flexibility of these structures, but will come with some administration challenges, the director of an accounting firm has said.
“It will add flexibility to the structure because for a family unit you quite often have more than two children and instead of setting up two funds to accommodate all the children, they can now all fit into one fund,” HLB Mann Judd Sydney superannuation director Andrew Yee told a media briefing in Sydney today.
Yee identified the possibility of the move resulting in better asset management within SMSFs as well.
“With more [members] you can get more money into the super fund. That’s helpful, for example, if you’ve got a large asset that you need to invest in, say a property, you’ll have extra member contributions and with the caps reducing over time this may be an avenue to get that extra money into the self-managed super fund structure to provide that extra flexibility for those non-traditional investments,” he pointed out.
However, he added fund administration complexities could emerge from an increased number of members in an SMSF due to the segregation of assets among members and the increased possibility of the fund having members in both accumulation and pension phases.
“Then there is decision-making and the signing-off on accounts and minutes and [whether] some members dominate others that could be other issues down the track,” he said.
HLB Man Judd Sydney personal wealth management partner Michael Hutton pointed out the new measure could present an opportunity to address SMSF trustee incapacity.
“[If the children are included] as the older generation gets older and perhaps less with it or less inclined to deal with matters of the fund, then maybe the younger generation can step up and take on more of the day-to-day responsibility [of running the fund],” Hutton said.