If you have a self-managed super fund (SMSF) or small APRA fund (SAF), you'd be happy to know that new legislation came into effect July 1, 2021, increasing the maximum number of members for these funds. Now, you can have up to six members from the previous cap of four.
Although this is great news to most, this will still vary in state-based and trust deed regulations. Seeing as there is still some information that may affect your funds, it's best to work with an experienced broker to ensure that you're taking the necessary steps when making changes with your fund.
What Do I Need to Know?
When you have a self-managed super fund (SMSF), you can either have individual trustees or corporate trustees—where the latter are all directors of the corporate trustee. SMSF can be pretty complicated, so it's best to seek professional advice if you want to understand the impact of this legislation on your fund.
Today, 17A(1)(a) of the Superannuation Industry (Supervision) Act 1993 (SIS Act) requires an SMSF to have less than five members. Besides that, each member in the fund should be a trustee of the fund. With this, you can ensure that all members will be involved and equally responsible for financial decisions and investments.
Now that the Government allows up to six SMSF members, those with larger families will have more opportunities and solutions that could help manage long-term funds and capital investments, like business real estate property and commercial properties. With the extra two members, you can now boost your cash flow by using contributions from newer members without the pressures of long-term investment.
Again, you should note that each member should be a trustee of the fund, and with that, adding two members shouldn't be taken lightly. There can be added complexity with your provisions, and your investment strategy may need to change. Besides that, you may need to make changes in the trustee arrangements, which could ultimately impact who controls the funds.
Because of this, working with a professional self-managed super fund broker is vital to understand every detail of the new legislation. This way, you can make the smooth transition in adding two more members to your fund, avoiding complications and disputes.
How Do You Add More Members to Your Fund?
Although it can be quite exciting to add more members to your fund, financial professionals recommend waiting until the ABR has been updated. However, if you can't wait until the ABR has been updated, the interim solution that has been available since July 1, 2021, is something you can do.
First, you want to register your SMSF through the ABR, adding members one to four. After that, complete the Change of Details for superannuation entities form (NAT3036), so you can provide all the details of members five and six. After that, they will process this in the ATO system and update the ABR.
Note that there may be delays in the process, and speaking to a broker to understand the complexities of the process is key to avoid any issues and to have a smoother transition.
The Bottom Line: Adding Two More Members in Your Fund Can Be a Game-Changer
Seeing as adding two more members to your self-managed super fund or small APRA fund holds many benefits, it's best to speak to a professional broker to see the changes you can make to help boost your cash flow and investments.
Just like any legislation, there are some factors that you need to consider and research on, so before jumping on the train and making these big changes, it's best to know what you're signing up for.
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