But is allowing more members in a fund going to be a case of the more the merrier, or maybe there will be too many cooks in the kitchen? Read on and see how it could potentially work (or not) for you.
There are definitely some major upsides, so let’s dive on in:
· Family of Five? You’ve previously been shut out of the SMSF game so now this is a welcome change and bigger families can now share a single fund.
· If two smaller funds can now join as one, the operating costs will proportionately reduce with the additional members onboard.
· Increased capital means more scope in a larger fund to allow for a broader range of investments that were otherwise unattainable.
· Planning on travelling overseas for a prolonged period? Having additional members can put the SMSF in a better position to meet the central management and control criteria necessary to qualify as a complyingAustralian superannuation fund. For the central management and control test to be met at least 50% of members must exercise strategic and high-level decision making in Australia.
· The End Game. The ability for estate planning goals to be achieved will be more manageable with increased balance of assets to draw from.
Sound pretty good? Before we go too far, here are the downsides:
· Always. Check. The. Deed. The governing rules of the SMSF may require an update to cater to the change to allow for additional members over the existing four-member limit.
· Who decides what? Problems can occur when members have different investment needs. For example, parents might be closer to retirement while the children are focused on the longer term. The investment strategy of the fund may not meet everyone’s requirements.
· Disputes. The more members and trustees in the fund, the greater the potential for disputes. The rules around appointment and dismissals of trustees, voting rights and meetings need to be crystal clear.
· Saying Goodbye… the death of a member can be a tricky one and there is potential for disputes when it comes to the distribution of death benefits to nominated beneficiaries. There may be a need to update or make changes to your estate planning documents including your Will and Enduring Power of Attorney because of changes to your SMSF.
The best advice about the six member SMSF is to ‘look before you leap’, make sure you’ve done your homework and have concrete reasons for the final decision. Dot all the I’s and cross all T’s, because if you don’t get it right, you and your 5 members may end up with no safety net and a big mess.
If you’d like strategic advice for your SMSF, our expertise has you covered. Speak with one of the Attune team on 1300 866 113 or click here to start the conversation on email.