In this edition of ‘It depends’, partner Scott Hay-Bartlem talks about the changes to the rules around how many members an SMSF can have.
Hello. We’ve previously published an It Depends about how many members my SMSF can have.
So, the rules have now changed. So, this one is about whether my SMSF can have six members.
Can an SMSF have six members?
So, the law has been recently changed, so that SMSFs can now have up to six members.
The previous rule used to be you had to have less than five.
Can my SMSF have six members?
So, can your SMSF have six members?
And the answer is it depends.
While the law has changed, some trust deeds still have that limit in there of less than five.
So, you need to read the deed, read the deed, read the deed.
You also need to review your trusteeship strategy, because practically, if you’re going to have more than four members, you’ll need to go to a corporate trustee, because every member will then have to become a director of that trustee company.
Is it a good idea for my SMSF to have six members?
Well, this is another It depends.
So, you can have more money in the fund so, you can have a greater diversification of assets, which is usually a good thing. You can use it to pass assets down like business property down to the members to stay in the fund.
You can have more income coming in, which makes it easier to make pension payments.
On the flip side, with more people in the fund, there’s a greater potential for disputes. Can become far more difficult for decisions to be made.
Exiting an SMSF can be difficult at the best of times, let alone with far more people in and your death benefit planning becomes far more important with more people involved in making decisions.
If you’d like to talk about six member SMSFs, are they good bad or can you do them, please contact a member of our SMSF team.