SMSF trustees who wish to include a ‘child member’ who is under 18 years of age to the fund are able to do so, but will be required to appoint a further representative trustee at the same time, according to an SMSF legal firm.
Writing in a blog post in response to the question of whether it was possible to admit a child member to an SMSF, Townsends Business & Corporate Lawyers stated it was possible to do so despite laws regulating SMSFs requiring members of a fund to also be the trustees of that fund.
“Children under the age of 18 cannot be admitted as members of a self-managed super fund in their own right. This is because they can’t be trustees or directors of the trustee company due to the requirement that individual trustees and/or corporate directors must be at least 18 years of age or older,” the law firm said.
Townsends pointed out, however, that section 17A(3)(c) of the Superannuation Industry (Supervision) Act allows a child under 18 to be admitted as a member of an SMSF if the child’s parent or guardian agrees to be appointed as a ‘representative trustee’.
“Under this structure, the ‘representative trustee’ will need to sign a resolution admitting the child as a member of the self-managed super fund. Once signed, the ‘representative trustee’ agrees to be bound by the governing rules of the superannuation fund on behalf of the child and will be able to manage their interests in the fund until they have attained the age of 18,” it noted.
Additionally, the representative trustee would also be required to comply with superannuation and tax laws and take on all the responsibilities of a normal trustee.
Townsends stated any SMSF looking at adding members under 18 had to consider whether the trust deed permitted a child member to be admitted and amend it accordingly, but where there were no rules in place, “then it might be appropriate to amend them to specifically permit the admission of a child member in order to put the issue beyond doubt”.
It also pointed out the current investment strategy of the SMSF might need to be revised if a child member is admitted to the fund as their investment strategy would be different from those of the other members and/or the representative trustee.
Contributions would also be considered differently by the fund, it stated, noting contributions made for a child under 18 count towards their non-concessional contributions cap and not that of a parent who was a member or the representative trustee.