The ups and downs of six member SMSFs — are they really worth it?

By Rebecca Edwards / 07 September 2021
3 min.
Worthwhile read for: Individuals, families

Until recently, self-managed super funds (SMSF) and small APRA funds allowed for a maximum of four members. However, this changed on 1 July 2021 through the Treasury Laws Amendment (Self Managed Superannuation Funds) Bill 2020 which amended section 17A of the SIS Act, allowing these funds to have up to six members. But is it really a case of the more the merrier when it comes to membership numbers in SMSFs?

The upside

  • One of the main benefits is for bigger families to be able to share a single fund.
  • There is potentially more scope in a larger fund to allow for a broader range of investments. 
  • Increased scope for the SMSF to qualify as an Australian superannuation fund when one or more members travel overseas for a prolonged period, saving in administration costs.
  • In circumstances where a single fund is used instead of multiple funds, operating costs (which are often fixed) will reduce.

Sounds good? For some, the opportunity to have up to six members in a single SMSF certainly opens the door to benefits not previously accessible. But is there a downside? 

The downside

  • The investment strategy for a fund with six members (compared to say four or less) is likely to be more complex in nature.
  • The fund deed may not allow for the increase in members and amendments may be required to support a change of this type.
  • The more members, the more challenging management of the fund may be. It may be more difficult to reach agreement or carry out deed updates or even replace a trustee.
  • Having a larger number of members means an increased risk of dispute arising and potential challenges in the fund’s administration. There may also be some resulting inefficiencies in the making of decisions.
  • Your estate plan may be affected by the changes to your SMSF. There may be a need to update or make changes to your estate planning documents including your Will and Enduring Power of Attorney may arise because of changes to your SMSF.

If you are considering commencing a fund with a large member number or if you are considering restructuring your existing fund(s) to take advantage of the increase in member numbers, then you should seek legal and financial advice to ensure the decision you make is the right one for you, the members and your SMSF.

For more information, please contact our Estates and Succession team. 

Rebecca Edwards
Senior Associate
Rebecca Edwards is a Senior Associate in our Private Enterprise team. 

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