SuperConcepts general manager of technical services & education Peter Burgess said while the government still hasn’t released any legislation for the proposal to increase the number of members in an SMSF, Treasury are still confident the measure will be passed as law. The proposed start date for the measure is 1 July 2019.
“Treasury are feeling pretty good about this measure. They’ve had some positive feedback from the community so I think it’s inevitable that we will see this change go through,” Mr Burgess told delegates at the Chartered Accountants Australia and New Zealand National SMSF conference.
While some clients may benefit from having more members in their SMSF, Mr Burgess also noted that there are clearly some risks associated with this measure.
“Aside from the additional admin, and operational complexity involved with having more members in your fund, in my view, there are also some investment risks here,” he said.
“I’ve been having conversations with clients recently who are very excited about this proposal. What they want to do is set up an SMSF, pool their savings together and go out and get a residential property, and that property will be their retirement fund. Aside from the obvious diversification issues, there is also some succession planning issues there.”
“So while I think this measure is well intended, I can see some risks in allowing a larger group of individuals to pull their superannuation savings together and benefit from the investment concessions that are afforded to SMSFs.”
There are too many risks associated with this proposal and I fear that it will give the ever vigilant Industry Fund lobby more grist for the mill (in their attack on SMSFs) as the inevitable problems arise over time.
The requirement for all members to be trustees is the first sticking point. For example, it could be very unwieldy to get 6 people in a meeting to make a decision and, in any event, control becomes an issue.
The second big issue with this proposal is the expansion of the potential range of ‘related parties’. This can be complex to navigate with 4 members, let alone 6.
There are many more operational issues that could create inefficiencies and, none the least than death benefits.
At best this is a theoretical proposal that shows little understanding of how SMSFs work in practice.
Is it because some want to cash up to buy property in a SMSF? If so, it shouldn’t drive the agenda as I would say, it doesn’t represent a majority view.
(Kelly O’Dwyer’s reign was short lived but she certainly left a bag of problematic policy change proposals on foot.)