In the lead up to the federal budget last year, the government announced plans to increase the limit on the number of members allowed in an SMSF from four to six.
The government has now introduced Treasury Laws Amendment (2019 Measures No. 1) Bill 2019, containing the measure to change the SMSF member limit, into the House of Representatives.
Why the increase?
The explanatory memorandum for the bill states that the bill is intended to increase flexibility for members.
“SMSFs are often used by families as a vehicle for controlling their own superannuation savings and investment strategies,” it said.
“For families with more than four members, currently the only real options are to create two SMSFs, which would incur extra costs, or place their superannuation in a large fund. This change will allow large families to include all their family members in their SMSF.”
The EM also confirms that the measure will also apply to small APA funds, as well as SMSFs.
It stated that this will ensure that the member limit for SMSFs continues to align with small APRA-fund funds.
It also makes amendments to the sign off requirements in the SIS Act about the accounts and statements that the trustees of an SMSF must ensure are prepared for each income year.
“These changes ensure that these requirements continue to apply correctly after the increase to the maximum number of members and to the maximum number of directors or trustees,” it said.
The state of play
Under the current law, if an SMSF has more than one director member, its accounts and statements for a year of income must be signed by at least two members in their capacity as individual trustee or as a director of a corporate trustee.
Under the updated requirements, an SMSF with one or two directors or individual trustees must have its accounts and statements signed by all of those directors or trustees. For SMSFs with between three and six directors, the accounts and statements of the SMSF must be signed by at least half of the directors or individual trustees.
“This approach maintains the standard under the previous provisions for funds that have between one and four directors or trustees, and extends the requirement that at least half of the directors or trustees sign the accounts and statements of an SMSF with either five or six directors or trustees,” it said.