Government to increase SMSF member limit

The Federal Government announced it will expand the maximum number of self-managed superannuation fund members from four to six - a proposal welcomed by the SMSF Association.

Revenue and Financial Services Minister Kelly O'Dwyer said the change will allow for greater flexibility given the strong growth the sector has experienced and will support members who want to manage their own super.

Additionally, SuperStream will be extended to include SMSF rollovers, allowing members to initiate and receive rollovers electronically between an APRA fund and their SMSF.

"This will reduce compliance costs, expedite the rollover process and further improve the integrity of the super system," she said.

"I have asked the ATO to work with industry on the design and implementation of this important reform, which is expected to commence late next year."

Based on ATO FY16 figures, the majority or 69.8% of SMSFs have two members, while 22.9% have one member. Less than 4% of SMSFs have three and four members respectively.

SMSF Association chief executive John Maroney said the proposal receives its tick of approval as six members will provide greater flexibility in structuring SMSFs.

"This will especially benefit family groups who want to include parents and their children (and potentially their children's spouses) in a single SMSF," he said.

"Currently, family groups may need to have multiple SMSFs to accommodate more than four members, so this proposal will allow a single SMSF for the group, bringing the benefits of reduced costs and greater scale."

Maroney said in some states, trust law will need to be amended to allow trustees to have up to six members. SMSFs can bypass this limitation by having a corporate trustee whereby member is a director of the corporate trustee.

Changing the mechanics of SuperStream will also be beneficial as SMSFs currently experience lengthy delays in receiving rollovers from large super funds.

"We have been lobbying for these changes for more than five years, arguing they will prove extremely beneficial to the SMSF sector by reducing red tape," he added.

Verante Financial Planning director and SMSF specialist adviser Liam Shorte said on Twitter having six members opens up strategy options that can keep commercial property via intergenerational transfers.

The proposals won't force the sale of properties out of the SMSF in the event a parent's death for instance, he said.

Read more: SMSFSMSFsSMSF AssociationSuperannuationSuperStreamFinancial Services MinisterJohn MaroneyKelly O'DwyerLiam ShorteSMSFA
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