The decision to allow the creation of six-member SMSFs and the passing of laws to enable that change from 1 July 2021 was motivated by political considerations, a strategy specialist has said.
“This is really important from a political perspective and the reasons [the federal government] has implemented six-member SMSFs is to drag money from the industry funds, which have become all the more powerful,” LightYear Docs founder Grant Abbott told attendees at a recent strategy seminar.
Abbott pointed out the decision to introduce the legislation had become more urgent with the ongoing rationalisation among industry funds, with the merger between QSuper and Sunsuper being a prime example.
To this end, he predicted the superannuation sector would likely end up with five or six very large industry funds with SMSFs being the rival alternative.
According to Abbott, action on this front from the Morrison government was triggered by the statistic showing there is over $1.3 trillion in the accumulation accounts of individuals who are under 50 years of age and members of Australian Prudential Regulation Authority-regulated super funds.
“The $1.3 trillion [is the] sort of money [the government] wants to flow into self-managed super funds to dilute the impact of industry funds,” he said.
Should a good proportion of this $1.3 trillion in accumulation phase be transferred into SMSFs, he predicted it would represent a significant opportunity for SMSF advisers.
“Setting up self-managed super funds and [providing investment advice for them means] there’s a really huge opportunity for SMSF investment strategists obviously with a financial planning licence,” he noted.
Further, he forecast this business opening for advisers servicing SMSF clients would only strengthen with the recent increase in the superannuation guarantee from 9.5 per cent to 10 per cent as it will mean additional fund flows toward super.
“So that increase [in the maximum number of SMSF members allowable] from four to six is going to have a really big impact,” he noted.