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Threshold change has SMSF slant

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SMSF trustees may need to reconsider whether to include children in their super fund in light of the impending abolition of the $450 threshold.

The scrapping of the $450-per-month threshold for superannuation guarantee (SG) payments from 1 July is a development that might lead SMSF trustees to reconsider how to structure their superannuation funds, a specialist lawyer has said.

“From 1 July 2022, employers will need to pay super for their employees who are under 18 years old if they work more than 30 hours in a week,” Townsends Business and Corporate Lawyers principal Peter Townsend noted.

“This is the result of the $450-per-month minimum threshold for super guarantee payments being removed so that employees who are under 18 will be eligible for super if they work more than 30 hours in a week, regardless of how much they’re paid.

“These changes again raise the issue of having your children as members of your self-managed super fund.”

Townsend suggested the assumption that a child with a part-time job will not qualify for SG payments is misplaced as additional shifts accepted during school holidays could see them exceed the 30-hour-a-week parameter.

“So now they’ll start to receive annoyingly small amounts of superannuation. The question then is: who should your child’s super be paid to? It seems that it could be convenient, cost-effective and even parentally responsible to have that super paid into your existing self-managed super fund,” he said.

According to Townsend, there are several reasons to justify including children in an SMSF.

“Predominantly [it would be] to save the costs eating away at your child’s small super balance in a public offer fund. In your SMSF, the costs can be controlled more carefully, will be shared with the other fund members and can be proportional to the size of their account,” he noted.

When making the decision whether to include their children in an SMSF, he pointed out several issues need to be considered.

“You’ll need to check the trust deed and governing rules of the fund. If your SMSF’s rules don’t permit child members, arrange with your accountant or fund administrator to have the rules changed,” he advised.

In addition, he indicated including children in an SMSF will require an adjustment to the fund’s investment strategy to cater for members with diverse financial interests due to their differences in age.

“Such a strategy should not be difficult or expensive to establish,” he said.

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