The Federal Government appears to have made good on their previous election commitment to increase the number of members to a maximum of 6 within a SMSF.
We have seen Treasury Laws Amendment (Self Managed Superannuation Funds) Bill 2020 introduced into the House of Representatives and moved swiftly in the Senate where it is more likely to be challenged by Labor. Most importantly, this is a stand-alone Bill, rather than last time where the change was lumped into a Bill to also reduce excise on craft beer – thankfully craft beer became cheaper!
The purpose of this change is to provide greater flexibility for joint management of retirement savings, in particular those with larger families. By and large, the proposed changes are quite simply and reflect what was previously proposed with the changes earlier in 2019.
Change to SMSF definition
The key change naturally impacts the definition of a SMSF within section 17A(1)(a), allowing for an increase to a maximum of 6 members.
It should be noted that subparagraphs changes within 35B(3)(a) and (b) will also occur to the number of parties required to sign the Accounts and Statements of the fund as part of the obligations under Division 3 in the SISA.
For a corporate trustee, where it has:
- One or two directors – each of the directors must sign; or
- otherwise – at least half of the directors must sign.
Where the fund has individual trustees:
- if there are only 2 trustees – both of the trustees must sign; or
- otherwise – at least half of the trustees must sign.
This change successfully navigates its way through both Houses, these amendments will apply from the start of the first quarter that commences after the Act receives Royal Assent.
A key area that would need consideration is the fund’s trust deed should a fund wish to increase membership to five or six members. If the deed is prescriptive on the number of allowable members, a trust deed upgrade may be needed to allow for such a change to the governing rules of the fund.
If you want to read more about this change, including tracking of the Bill’s status, you can do so here.