Question from Stuart Wilson
I would like to know why SMSF's are limited to less than 5 members. My family has in excess of 4 people in it and when including siblings spouses and children, many, many more than 4.
We currently have 4 separate SMSF's which quadruples the costs and time involved in managing the funds. As a very hands on SMSF trustee, we manage all of the investments and try to complete as much of the accountancy work as we can before handing the accounts to the accountant but the costs are still 4 times what they would be if we could run a single SMSF with more members.
Many articles and companies highlight the minimum investment required in a SMSF to make it viable when considering costs, surely and increase in the number of members allowed would enable more people to benefit from establishing a SMSF.
The restriction on membership seems to be an added cost to those people wanting to establish a SMSF.
Thanks, Stuart Wilson
Reply from Ramani Venkatramani, who is an actuary and between 1996 and 2011, he was a senior executive at ISC /APRA, supervising pension funds.
SMSF's predecessor, 'the excluded fund' was regulated by Insurance and Superannuation Commission with all other complying funds, with the idea that those who wish to control their own retirement savings should be able to do so, with basic requirements being met. It was considered that in order for the control to be properly exercised, the number of members should not exceed 4, as the option of going into the bigger sectors (corporate, industry or retail) was open.
Wallis Committee in 1997 recommended its continuation with the regulation shifting to ATO and a prohibition on trustee remuneration. The limit of 4 was retained.
While the number 4 itself is arbitrary, the idea is to keep it small and manageable. The possibilities of lifting the number, or changing the definition (to say, all members of a family regardless of number) were suggested during the Cooper review but were not accepted.
As there is no limit on how many SMSFs can be set up by someone, for more than 4, two or more SMSFs can be used under the current limit.
(We have also approached ASIC for a response).