The move to six member funds is unnecessary and will heighten certain SMSF structural issues one industry body has said, while other quarters have downplayed potential problems, saying such issues are not solely linked to having a maximum number of six members in a retirement savings structure.
Specifically CPA Australia has questioned the need for legislative change to raise the member limit for SMSFs, predicting the move might lead to more problems.
In its submission to the Senate Standing Committee on Economics regarding the committee’s inquiry on the Treasury Laws Amendment (Self Managed Superannuation Funds) Bill 2020, the professional body pointed to member voting, elder abuse and death benefit nominations as particular areas of concern likely to be exacerbated by having five and six member in an SMSF.
To this end it argued SMSFs with a greater number of members would find it more difficult than funds with fewer members to reach a consensus, and rifts among members were more likely to occur as a result.
CPA Australia also noted elderly members could be at a higher risk of falling victim to illegal behaviour by individuals appointed as their power of attorney, if the SMSF member limit was raised.
Further the industry body said the potential for member disputes over death benefits was likely to rise in larger member funds.
“We acknowledge that permitting [a] larger number of SMSF members will not necessarily lead to more SMSF death benefits disputes. However, the potential for such disputes to arise is increased, and given that death benefits disputes are an increasing problem for all superannuation funds, a proactive legislative and regulatory solution needs to be considered to address this concern,” it stated.
By contrast the Association of Financial Advisers (AFA) supported the move to increase the maximum number of SMSF members from four to six, and while acknowledging these types of funds have inherent structural risks, noted they were not likely to be made worse by the new rules.
“We are not aware of any additional risks or other problems that may arise specifically as a result of this legislation. There are risks involved in intergenerational SMSFs, however those risks already exist and are unlikely to be made greater, simply as a result of increasing the number of members within the fund,” the AFA said in its submission.
The SMSF Association was also supportive of the legislative change in its submission to the Senate Standing Committee on Economics.
“The SMSF Association notes the possibility that allowing larger SMSFs, especially where adult children are members of the same SMSF as their parents, could give rise to opportunities of elder abuse and complex estate planning disputes. However, even without larger SMSFs, these problems can currently occur and can often be driven by non-members,” the association explained.
The Treasury Laws Amendment (Self Managed Superannuation Funds) Bill 2020, increasing the maximum number of allowable members in SMSFs from four to six, was introduced into the Senate on 2 September.