Self Managed Super Fund (SMSF) changes proposed after 1 July 2019
By Melissa Ramoc• 13 December 2018 • 3 min read
The implications of Commonwealth Government changes to membership rules applying to self-managed super funds.
Following on from the 2018-19 Federal Budget Papers, the Federal Government has proposed to change the membership rules applying to SMSFs so that from 1 July 2019, an SMSF can have up to six members. This article considers the potential implications and opportunities.
SMSF allowable membership
Currently, an SMSF must have no more than four members. Following the release of the Budget Papers, SMSFs may have up to six members from 1 July 2019. The idea behind this change is that it will improve flexibility in the joint management of retirement savings, particularly for larger families.
A typical example of a family group (being parents and up to four children) benefitting from the change is where:
- an SMSF is established
- an existing SMSF varied
- to permit the entire family group to be members of the same fund.
This would satisfy the maximum membership requirement of six members, while also allowing the parents (assuming they each have a greater earning capacity than their children) to use the contributions caps of each child by making contributions on their behalf. It would also allow such a family group to do so using one SMSF, rather than multiple SMSFs under the current law.
High net worth individuals will also be in a position to plan for their children’s future by making contributions into a child’s super account. The changes will ultimately result in increased funds being deposited and retained in super and therefore taxed concessionally.
Check your trust deed
Before an SMSF can admit additional members, in excess of four members, advisors will need to ensure that the SMSF’s trust deed permits this. Accordingly, once the proposed change becomes law and an SMSF intends to have more than four members, advisors may need to vary the existing trust deed to ensure it allows up to six members.
Member as trustee
Further, for SMSFs with individual trustees, each member will also need to be appointed as a trustee of the SMSF in accordance with super law. Given that trust law in various States permits a maximum of four trustees in a trust – changes to trust law and/or super law may need to occur to support the proposed change. Otherwise a corporate trustee will be required.
In the case of SMSFs with a corporate trustee, the additional members will need to be appointed as directors, and ASIC notified of their appointment.
Minors as members: trustee arrangements
With the increase to six members, families are more likely to use SMSFs to admit children.
Minors cannot act as trustees or directors, so the SMSF’s records must reflect that the child’s parent or guardian is appointed and acts as trustee/director of the trustee ‘in place of the member’.
 Section 17A of the Superannuation Industry (Supervision) Act 1993 (Cth) defines a ‘self-managed super fund’ as a fund with fewer than 5 members, amongst other requirements.
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