The long-touted Bill to increase the maximum number of members of a self-managed superannuation fund finally received royal assent on 22nd June. Effective as from 1st July, 2021, self-managed superannuation funds may now have up to 6 members.
What does that mean for people operating SMSFs?
1. The correspondence between the members and the:-
- individual trustees; or
- directors of a corporate trustee
is to be maintained, so that every member has a voice in the decision-making process. Of course, if a member is subject to a legal disability, the member’s legal representative must become an individual trustee or a director of the corporate trustee.
2. Some families, or groups of friends, who have been required to operate with two funds may be interested in rolling the members from one fund into the other fund.
3. A number of State-based Trustee Acts impose a ceiling on the number of trustees of a trust (one species of which is an smsf). In summary:-
- ACT – Section 6 and 7: No more than 4 trustees is permitted
- NSW – Section 6 and 7: No more than 4 trustees is permitted
- NT: No limit
- Qld – Section 11: No more than 4 trustees is permitted
- SA: No limit
- Tas: No limit
- Vic – Section 40: No limit, but if the trust holds land, no more than 4 trustees is permitted
- WA – Section 7: No more than 4 trustees is permitted
If an SMSF wishes to increase the number of members and is subject to a restriction on the number of trustees, it will need to appoint a corporate trustee.
What does that mean for the trust deeds?
4. If clients wish to take advantage of the larger number of members and have an existing trust deed, you will need to check whether the trust deed:-
- limits the number of members to four; and/or
- restricts the number of individual trustees, or the number of directors of a corporate trustee.
5. If there is a situation where children out-number their parents, changes can be made to the trust deed or constitution to ensure that the trustees have their vote weighted by their account balance.
6. Similarly, it may be desirable to change the trust deed or constitution to permit resolutions (of one or both of the members or trustees/directors) to be passed by:-
- a simple majority; or
- a higher majority; or
We are ready to assist you with any question you may have relating to this newest change to self-managed super funds.
From Castle Corporate Pty Ltd and Castle Legal Pty Ltd
Partnering with you to get it right.