SMSF Cap Increased from 4 to 6?
In her keynote address to Melbourne’s SMSF expo Kelly Dwyer the minister for revenue and financial services stated that the Turnbull government would increase the membership cap on SMSF’s from 4 to 6. The move comes after continued lobbying by the Self-Managed Independent Superannuation Funds Association (SISFA) to increase the maximum membership number for SMSF’s. SISFA managing director Michael Lorimer told the AFR that the increased membership cap would accommodate larger family groups who have traditionally had to setup multiple funds in order to house all members of the family. Mr Lorimer cites an example of a mum and dad with three daughters who under the current legislation have been forced to operate two SMSF’s in order to fit under the 4-member limit.
The increased membership limit will resolve situations like this and likely see a decrease in the number of one and two member SMSFs which currently make up over 90% of all SMSFs according to the most recent ATO statistics. Larger SMSF memberships are also likely to continue to perpetuate the corporate trustee trend as such a structure will often be the only plausible option given the higher chance of membership changes in a 5 or 6 person SMSF. The fact that the ATO enforces administration penalties on a per trustee basis should also serve to encourage those considering a “family sized” SMSF to go down the corporate trustee route.
Interestingly the increase in membership size will likely force state legislators to rewrite current state trust acts which limits the maximum number of individual trustees of a trust to 4. Again whilst the use of a corporate trustee eliminates this issue Mr Lorimer believes state governments will look towards amending the statutory definition of a self-managed super fund which currently requires all SMSF members to be trustees and all trustees to be members. Relaxing these legalisations and permitting members who are not also trustees appears to the simplest way to harmonise state and federal laws.
In her speech Ms Dwyer also announced that Super Stream requirements will be extended to include SMSF rollovers. Ms Dwyer said this change will allow SMSF members to initiate and receive rollovers electronically between an APRA regulated fund and their SMSF. Many SMSF trustees have likely experienced the difficulties of rolling over money from larger super funds and will welcome the change which are designed to reduce friction in the superannuation system.
Sources – Australian Financial Review & SMSF Adviser
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