The Government has recently introduced Treasury Laws amendment (2019 Measures No 1) Bill 2019 into the House of Representatives, which highlights proposed changes to Self-Managed Superannuation Funds (SMSFs), with an emphasis on member limits and necessary sign off requirements. The Bill proposes changes to increase the current members allowed for a singular SMSF from four to six.
Ideally, for a Bill to pass through the House of Representatives, the reasons for the changes must be valid and of relevance. Let’s focus on how the approval of the Bill will be beneficial to the current management of a SMSF. So, let’s track back to the fundamentals as to why SMSFs are utilised, and who amongst society are most likely to create one.
Families usually open SMSFs and the fund itself acts as a central place where their savings are held. It provides them with complete assurance and control over how these reserves are invested, and decide which investment opportunity would be the most prosperous, with the desire to flourish these funds into a substantial endowment. Getting back to how this Bill will strength this ideology, under the current regulations, SMSFs have a limit of four members, and there would be a likelihood, those wishing to open a SMSF may have to look elsewhere or need to open two funds under the current system. Options include creating two funds (albeit tolerate the extra costs) or open a large fund (again added costs). So, by increasing the allowable members by two, it would cater to those utilizing a current SMSF (and hope to added more members to their current arrangement) or those looking to open on in the near future.
Another key change declared in the proposed Bill, and would tie with the change in the number of members, are the requirements relating to directors/ trustees signing annual accounts and statements for SMSF. Currently, prior to the introduction of this Bill, if a SMSF holds more than one director, then the accounts and statements must be signed by at least two members of the fund (which are either a the trustee or as a directors of a corporate trustee). Although, with the proposed changes, an SMSF with one or two directors or individual trustees are required to have their accounts and statements signed by all recorded directors or trustees. For a SMSF that has 3 to 6 directors or trustees, at least half the directors or trustees would be required to sign-off on their accounts and statements. Ultimately, the proposal guarantees that at least half of the directors or trustees give authorisation to the accounts, with the proposed introduction of 5 and 6 membered SMSF.
The changes outlined in the Bill would have quite a lasting impact on the formation and management of SMSF. Evidently, emphasizing the need for the House of Representatives to proceed quickly with the approval of this Bill.