Family businesses and farming families stand to benefit from the government decision to allow six members per super fund.Tamara Voninski
The government's decision to allow six-member self-managed superannuation funds (SMSFs), announced by Financial Services Minister Kelly O'Dwyer on Friday, could be seen as a strategic concession to one group likely to have been offended by its 2016 super accumulation restrictions – small business super members.
In 2010 when the Super System Review (also known as the Cooper Review) issued its final report, one recommendation that wasn't accepted was increasing the number of individuals who could own and manage an SMSF from four to 10 members.
The original 10-member recommendation was motivated by evidence that this limit should be increased in response to the prevalence of family businesses and funds with the scope to operate over two or more generations. This limitation also restricted operators of small businesses with multiple owners who sought to invest together in superannuation.
Many family businesses will often have more than four members, established by parents with more than one son or daughter interested in taking over a business – a family farm, for instance.
The modest increase from four to six members might be seen as a gesture towards Treasury representatives who argued to the Cooper Super Review that allowing more than four members to be owners and trustees of an SMSF could create other problems, such as making the management of an SMSF more complex.
This issue could be addressed by encouraging six-member SMSFs to adopt a corporate trustee structure. Having such a structure can deal with complex circumstances that can arise when funds with individual trustee members must deal with a member death.
Arguments in favour of a modest increase in SMSF member numbers included a submission by the Australian Taxation Office that the majority of SMSFs – nine out of 10 funds – had one or two members. This indicated there was likely to be little risk in raising the limit for the minority of SMSFs that wanted to do so.
Just under one in four SMSFs are single-member fund, seven out of 10 are two-member fund. Less than one in 10 funds currently have three or four members. This, of course, may change with the change to member limits.
A proposal to extend the Superstream measures to rollovers from public super funds to SMSFs would address the costs associated with super transfers between such funds. Superstream identified excessive costs and complexities arising from manual processing of both money transfers and data.
It included such measures as allowing the use of tax file numbers (TFNs) and encouraging the use of technology to improve processing efficiency.
By John Wasiliev
27 April 2018