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Jumbo SMSFs - 6 member SMSFs - legislation introduced
The proposal, announced in the May 2018 Budget, has now been introduced as draft legislation. The proposal is to amend the definition of “self managed superannuation fund” in s17A of the Superannuation Industry (Supervision) Act 1993 by the simple device of changing “fewer than 5 members” with “fewer than 7 members”. This change, if enacted, will apply from 1 July 2019.
Once enacted, corresponding changes will have to be made to the Superannuation Industry (Supervision) Regulations to replace references to “fewer than 5 members” with “fewer than 7 members”.
There are a number of advantages of Jumbo SMSFs including
- ecomonies of scale - standing/fixed costs spread over more members and larger fund balances;
- better utilisation of franking credits (should the current Labor proposal to deny refundability of excess franking costs be implemented);
- greater maximum concessional contribution in flow - more cash to survive borrowings – in particular, for business principals to purchase business premises; and
- the ability to shelter small SG contributions of children from retail/industry fund account fees.
Of course, there may be disadvantages too: such as having to deal with more individuals; children having greater knowledge of their parents' financial matters and different age cohorts requiring different investment strategies.
Jumbo SMSFs may not be for everyone but they may be very useful for some.
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