A Senate committee tasked with reviewing a bill that would allow SMSFs to have six members has recommended it be passed, but a dissenting report called for stronger safeguards around SMSF advice and protections for fund members.
In recommending the Senate pass the Treasury Laws Amendment (Self Managed Superannuation Funds) Bill 2020, the Senate Economics Legislation Committee stated it recognised the “obvious benefit” and efficiencies in allowing six-member funds, particularly among families with more than four members and who manage their own superannuation.
“As such, the committee is of the view that families should have the option to establish a single SMSF together if they wish to, thereby reducing administrative costs,” the committee stated in a report released to the Senate on 4 November.
While the committee noted there was little demand at present for increasing the maximum number of members in an SMSF to six, it also pointed out most submissions on the issue were supportive and “considers most objections to be more general in nature rather than significant concerns”.
A dissenting report from the two Labor senators on the six-person committee claimed the increase would lead to “greater perverse outcomes for members of SMSFs through poor financial advice” and referred to a submission from the Australian Council of Trade Unions commenting on advice from banks and retail super funds.
As such, the dissenting report opposed the passage of the bill and recommended the adoption of reforms put forward by the Productivity Commission to create stronger safeguards on SMSF advice.
It also called for a minimum standard of protections to be put in place for each member of an SMSF to prevent conflicts in the governance of the fund and that mandatory education is provided to all fund trustees and members.
This last point was also picked up in the main report, which stated “while SMSF trustees should already be familiar with their prudential responsibilities, the committee encourages the ATO to maintain its level of engagement in assisting and educating the sector as the changes associated with the bill are brought into existence”.
The bill was introduced to the Senate and read a first time on 2 September and the following day was referred to the committee for inquiry and reporting by 4 November.
The SMSF Association and the Inspector-General of Taxation and Taxation Ombudsman were among those whose submissions argued in favour of the passing of the bill.
The bill will now return to the Senate for a second reading and voting on its further progress.
