6-member SMSFs ‘a solution looking for a problem’
The take-up of six-member funds is unlikely to be substantial with the idea of adding adult children to the fund unappealing to many SMSF trustees and also risky in some cases, says an SMSF services provider.
Heffron SMSF Solutions head of customer Meg Heffron said that, with the government’s proposal to extend the total number of SMSF members to six mainly targeted at families, she expects the measure won’t attract a significant amount of interest.
“I can’t imagine that it’s going to result in a boom of business partners setting up a fund together, so it [seems] to be mostly targeting families. The measure appears to be responding to the desire for SMSF trustees to have all their kids in their fund,” Ms Heffron said.
“Most families have either four or fewer kids, so six members probably covers everything, but I wonder if people actually will take it up? I wonder if this is actually a solution looking for a problem. I don’t know an awful lot of people who are desperate to have their children in their fund.”
If Labor’s proposed policy around franking credits is implemented, however, then this could drive trustees to add more accumulation members, she said.
“Then maybe people will do it. They may add their two children plus their children’s spouses and then I expect the future of litigation is going to be a falling out between different members of an SMSF,” she warned.
“It’s something to be so careful of, even just adding your kids but certainly when you’ve also added their spouses to your SMSF.”
While Ms Heffron said that this may provide a tax benefit if the franking credit proposal does go ahead, which for some SMSF trustees could be substantial, it’s a risky move to dive straight into having multiple generations in an SMSF.
“If anything is going to change interest in this, it will be the franking credits. I don’t think the measure in itself will be of much interest,” she said.
Miranda Brownlee
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.
