The SMSF Association has used its submission to the Senate Standing Committee on Economics to back the government’s proposal to increase the maximum number of members allowable in an SMSF from four to six.
The industry body has argued the move will provide additional flexibility and choice within the current retirement saving system.
“We think this is an important reform that will give families with five and six members the ability to establish an SMSF together or allow the remaining members of a family to join an SMSF, an option now unavailable to larger families,” SMSF Association chief executive John Maroney said.
“By allowing the pooling of superannuation balances by increasing SMSF members, it means individuals can enjoy the benefits of consolidating assets, increased investment opportunities and flexibility to diversify.”
According to Maroney, the ability of this proposed policy to allow more members into an SMSF who are in accumulation phase will assist trustees in managing any changes to imputation credit refunds.
“This would provide extra flexibility for franking credits to be used to offset tax liabilities instead of being paid as refunds – an important consideration with Labor proposing to cancel cash refunds for excess franking credits,” he noted.
“Although this would result in more consistent treatment of franking credits with most large superannuation funds, it also serves to highlight one of the inequities of any proposal to deny franking credit refunds.”
An added advantage of the measure the association cited was the ability to allow future generations to play a role in sorting out significant matters such as trustee incapacity.
“From an intergenerational perspective, if children know how their parents’ affairs, finances and superannuation are managed, this familiarity can facilitate improved and more timely estate planning across the generations,” Maroney said.
“For example, including adult children in their ageing parents’ SMSF could help when making administrative and investment decisions for the fund.”
However, he stressed the importance of seeking specialist advice when looking to increase the number of younger members in a fund.
“Issues such as elder abuse, complex estate planning disputes and inappropriate investment strategies can occur in SMSFs with up to four members, so the possibility of allowing larger SMSFs could see this happen more often,” he warned.
“Accordingly, larger SMSFs should only be used in limited situations and with specialist SMSF advice.”