Six Member SMSFs
Since their introduction in Australia, SMSFs have only been able to have up to four members. It has been proposed for some time that this maximum limit should be increased, and this has in fact just become reality. Pursuant to the recent passage of legislation (refer to the Treasury Laws Amendment (Self Managed Superannuation Funds) Act 2021), as from 1 July 2021, an SMSF may have up to six members.
It should be noted that the SMSF trustee/member rules otherwise still apply. In particular, each member of an SMSF is generally still required to be a trustee (or a director of the corporate trustee), subject to certain exceptions for minors and those who have executed an enduring power of attorney, etc. Therefore, if a new SMSF is established with six members, then each of those members must generally be a trustee/director. Also, while at least two additional members may now be admitted to an existing SMSF, those additional members would also (generally) need to be appointed as additional trustees (or made directors of the corporate trustee).
However, note that the state/territory legislation in some jurisdictions may limit the number of individual trustees that a trust (including an SMSF) may have to four. This means that an SMSF that is to have five or six members may require a corporate trustee rather than individual trustees. Independent advice should be sought in this regard as required from a state-based adviser.
Also, before the number of members of an SMSF is increased to five or six, the SMSF’s trust deed should be examined to see if it limits the number of members to four, and updated if required. If the SMSF has a corporate trustee, the company’s constitution should be examined to see if it limits the number of directors to four, and again updated if required.
Whether an existing SMSF should increase its number of members to five or six (or a new SMSF should be established with five or six members) should be considered carefully, especially as each member must generally be a trustee or director of the corporate trustee. While there are clear advantages to having more members (such as increasing the capital available to invest or providing additional estate planning options), it can also add complexity to the SMSF’s management and investment strategy, and possibly increase the likelihood of disputes between the trustees.
The superannuation legislation has also been amended to require the accounts and statements of SMSFs with three to six trustees (or directors) to be signed by “at least half of” the trustees (or directors). An SMSF with one or two trustees/directors must have its accounts and statements signed by all of the trustees/directors.
NTAA Corporate’s products, including in particular our SMSF deed and company constitution, allow for this increase in members from 1 July 2021. If so instructed, we can of course for our standard charge provide documentation in relation to establishing new SMSFs, upgrading existing SMSF deeds, and replacing company constitutions, as well as appointing new trustees and admitting additional members for existing SMSFs. Order SMSF Establishments or Deed of Variations by clicking the link below to order via our online portal.