Expanding the number of members in SMSFs from four to six could take many weeks due to compulsory ATO examinations and will put any fund going through that change offline for the entire period, an SMSF technical expert has highlighted.
Heffron Head of SMSF Technical & Education Services Lyn Formica said the proposed changes allowing SMSFs to increase the maximum number of members from four to six will mean any additional trustees will have to be vetted by the ATO to ensure they meet the standards to be a trustee.
Formica said the process applies to any change of trustee, or change of a director of a corporate trustee, and would therefore be applied to any trustees added to a fund once six members were allowed.
“Anytime now when we change a trustee, just like it does when someone applies for an ABN (Australian business number) for a new SMSF, the ATO runs some background checks on the new trustee or the new director,” Formica said as part of recent online Heffron technical update.
“I’m still exploring with the ATO exactly what those checks are and I presume they are very similar to the checks they run for a brand new SMSF, but they are trying to make sure that these are appropriate people to be trustees or directors.
Formica pointed out as long as the ATO was conducting checks on potential trustees, the status of the SMSF on Super Fund Lookup would be changed to ‘Regulation Details Withheld’ stopping any rollovers or contributions coming into the fund.
“My understanding at the moment is that it can take up to 56 days for the ATO to process those background checks,” she added, noting there was still some uncertainty as to whether the timeframe applied was for calendar or working days.
“I am continuing to explore with the ATO to try and workout exactly what they are checking for and in what cases it will go straight through but this is something to be mindful of whether you are adding members to fund or just even just a standard change of trustee,” Formica advised.
A bill to allow for the creation of six-member SMSFs was introduced into the Senate in September and in November a committee tasked with reviewing the bill recommended it be passed. At the time of writing the bill remains before the Senate.