From 1 July 2021, the maximum number of members eligible to form part of a self-managed superannuation fund (SMSF) and small Australian Prudential Regulation Authority (APRA) funds has increased from four to six.
This change stems from the Treasury Laws Amendment (Self-Managed Superannuation Funds) Bill 2020 which was officially passed on 17 June 2021. Within this Bill was not only the request to increase the number of fund members, but also the change to extend the eligible age of utilizing the bring-forward provision from 64 to 66.
Given SMSFs will have the ability to increase the members of a fund from four to six, the following should be considered before taking any further action:
Introducing Younger Members – Historically, we would see children introduced into an SMSF as Mum and Dad get older. The change brings the ability for larger families to grow their retirement benefits together by allowing children to be members of existing family SMSF’s where the four-member cap had been met.
Reduction in Operating Costs – The additional members in an SMSF may allow for proportionately fewer operating costs.
Better Access to Assets – With a larger number of members, the additional capital in the SMSF may allow greater access to assets that where otherwise unattainable.
Increased ability to meet Residency Requirements – Where one or more members travel overseas for an extended period, the additional member allowance can put the SMSF in a better position to meet the central management and control criteria necessary to qualify as a complying Australian superannuation fund. For the central management and control test to be met at least 50% of members must exercise strategic and high-level decision making in Australia.
Estate Planning – The ability for estate planning goals to be achieved will be more manageable with increased balance of assets to draw from
Deed updates may be required – The governing rules of the SMSF may require an update to cater to the change to allow for additional members over the existing four-member limit.
Decision-making ability – With a greater number of members, the strategic high-level decisions and general day-to-day operations of the fund may be harder to resolve amongst the trustees
Administration burden – The ability to have the administration completed will become a lengthier process