It has been a few years since the proposal to increase the number of members in a self-managed super fund (SMSF) from four to six was put forward by then Treasurer Scott Morrison.
On 22 June 2021, the legislation for this proposal received Royal Assent.
SMSFs are permitted to have up to six members from 1 July 2021.
There is a lot to consider when adding members to a SMSF and may not suit everyone.
- More members can pool their balances to purchase larger or higher value assets such as property.
- It could increase the ability to make contributions which in turn could increase cashflow.
- Allows families to include more family members. It would allow Mum & Dad to include up to four children under the same SMSF.
- Increased complications when there are disputes, in particular family law disputes
- Increased risk of control imbalance if voting is based on weighted balances.
- All trustees/directors are responsible for decisions made, even if they are not directly involved. Succession planning and future control will need to be carefully considered to help manage the risk of loss of capacity and death
- Most States and Territorities, include New South Wales only permit up to four individual trustees. Accordingly, the SMSF will need to have a corporate trustee where all members would be directors in order to have up to six SMSF members.
- Some trust deeds specify the four member limit and would need to be varied before increasing the number of members.