SMSF Trustees: The Optimal Number
The Treasury Laws Amendment (Self Managed Superannuation Funds) Bill 2020 has now received assent and become Act No 47 of 2021. From 1 July this year Self Managed Superannuation Funds (‘SMSF’) will be allowed to have up to six members and trustees rather than the current maximum of four.
Despite this the optimal number of SMSF trustees remains one; a corporate trustee.
For SMSF where individual trustees persist there may be significant legal issues if more than four trustees are appointed. Whether there is an issue and how it can be managed will depend on which state the particular SMSF is established in. It has long been accepted that a superannuation fund is a trust and so will be subject to the relevant Trustee Act in the state in which it is established.
In Queensland the position is simple. A trust may only have up to four trustees and where a fifth or subsequent trustee is appointed those appointments are invalid.
In Victoria the position is not simple. A trust which does not hold real property can have any number of trustees. However, a SMSF which holds land in Victoria is limited under section 40 of the Victorian Act to have no more than four trustees and where a fifth or subsequent trustee is appointed those appointments are invalid.
If you appoint a fifth or sixth trustee to a SMSF in South Australia, Tasmania or the Northern Territory you do not have a problem.
In New South Wales, Western Australia and the Australian Capital Territory more than four trustees are only permitted to act if the trust deed specifically permits five trustees or six trustees to act. SMSF operating in these states may need to ensure an amendment is made to the deed of the SMSF to permit a higher number of trustees before a fifth or sixth is appointed.
Finally, where there are individual trustees and one dies or exits the fund for any other reason each asset held will have to be re-registered in the names of the remaining trustees. Repeated conveyancer fees or the costs of updating a share registry are likely to far outweigh the costs of establishing and maintaining a corporate trustee.
While the ability to have six members in a SMSF will be of great benefit to many families the optimal number of trustees remains one.