As part of last week’s Federal Budget, the Government confirmed that they intend to legislate to increase the maximum number of members that can belong to a single SMSF from four to six, with this change to apply from 1 July 2019.
In this article, Lyn touches on some of the things to consider in relation to this proposal.
There are potentially a number of perils in adding additional members (eg adult children) to an SMSF. For example, parents risk being “out-voted” by their children in the running of the fund without adequate controls.
But conversely there can be a number of benefits depending on the situation. For example, building up balances for the adult children can help in addressing liquidity issues on the death of the parents or as a way of mitigating some of the impact of the ALP’s plans to scrap cash refunds for franked dividends –Meg covers this issue in detail here https://www.heffron.com.au/blog/article/could-children-in-the-fund-help-beat-the-alp-proposal-to-remove-franking-credit-refunds).
However, it is important to note that the Trustee Acts of some states/territories (eg NSW, QLD, VIC, WA and ACT) only allow a maximum of four individual trustees. SMSFs looking to take advantage of the increased membership would generally need to have a corporate trustee unless those state Acts were changed.
In addition, some trust deeds would also need amendment as they limit member numbers to no more than four. The Heffron trust deed does not include such a limitation.
We’ll be covering the pros and cons of including adult children in their parents’ SMSF in our upcoming Heffron Super Intensive Day.
But in the meantime, we are keen to hear your thoughts – do you have clients likely to want to take advantage of this proposal? If so, what is their driver? Pop us an email at firstname.lastname@example.org