Why are SMSF member numbers restricted?
All members of a self-managed super fund must be trustees either individually or as a director of the corporate trustee.
There is a maximum number of four persons allowable in an SMSF as per Section 17A(1)(a) of the SIS Act.
For larger families, this means that more than one SMSF will need to be set up if all are to be included. This may increase family costs but needs to be weighed against control and improved effectiveness versus industry or retail fund membership.
For many years the tax office has stood firm against increasing the allowable member numbers in an SMSF and falls back on the statistic that over 90% of SMSFs have two or fewer members.
This ignores the fact that in many instances larger families are forced to operate through multiple funds, with no logical argument for this restriction.
With multiple members we would recommend that the SMSF and trustee company deed be written in such a way as to give the individual trustees or directors, and therefore members, proportional voting rights to ensure people with higher balances are not taken advantage of by members with low balances, as is the case normally - one person, one vote.
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