Although the 2018/19 Federal Budget was relatively uneventful compared to previous years, the Government did announce that the maximum number of members allowable in self-managed superannuation funds (SMSFs) will be increased to six (up from four) from 1 July 2019.
However, in most cases it will not be as simple as just adding additional members to your SMSF. If you are considering adding extra members, you should consider the following:
1. First, check that your SMSF trust deed allows for more than four members.
Although it is not necessary to have in the trust deed, a number of popular SMSF trust deeds currently restrict the maximum number of members to four or provide for certain rules to apply only if ‘the SMSF has four or fewer members’.
These trust deeds will need to be amended before adding additional members.
2. The Superannuation Industry (Supervision) Act 1993 (Cth) generally requires each member of an SMSF to be a trustee of the SMSF, or a director of a corporate trustee.
Trust legislation in Queensland, New South Wales, Victoria, Western Australia and the ACT restricts the maximum number of trustees to four. As a result, it will generally not be possible for an SMSF that has six members and is governed by these laws to have individual trustees without using alternative arrangements, such as enduring powers of attorney.
Anyone wishing to have more than four members of an SMSF in Queensland, New South Wales, Victoria, Western Australia or the ACT will need to consider the trustee arrangements and, for example, appoint a corporate trustee, rather than have individual trustees.
3. The proposed change to allow for six members will also have estate planning and control implications. These should be carefully considered before adding additional members to an SMSF.