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Regulation, Superannuation

Six-member funds to be a reality

Six member SMSFs

Six-member SMSFs could become a reality by the start of the new financial year after parliament passed legislation allowing their creation.

Legislation that would allow the creation of six member SMSFs has passed through parliament and is expected to receive royal assent within days resulting in the change becoming effective from 1 July 2021.

The Treasury Laws Amendment (Self Managed Superannuation Funds) Bill 2020, which will amend the Superannuation Industry (Supervision) Act to increase the maximum number of allowable members from four to six in an SMSF, was first introduced into the Senate 10 months ago as part of an ongoing commitment by the government to introduce the measure first announced in 2018.

The bill was first introduced into the Senate on 2 September 2020 where it was read for a first time before being moved for a second reading, which took place on 16th June 2021, followed by a debate in the Senate chamber and a third reading, which progressed the bill to the lower house.

Later that day, the bill was introduced to the House of Representatives which passed it without amendments and royal assent, which will make it law, is expected to occur within seven to 10 days.

This timeframe will mean the changes will be effective from 1 July 2021, which is the start of the new financial year and the quarter after which royal assent has been received.

The SMSF Association noted the approval of the bill in the Senate, stating via Twitter: “The SMSF Association has previously supported 6 member funds. While we don’t expect this change will lead to a significant increase in the number of SMSFs being established, [it] will provide greater investment flexibility, choice and lower fees for those in a position to utilise it.”

In related news, parliament also passed the Treasury Laws Amendment (More Flexible Superannuation) Bill 2020, which will amend the Income Tax Assessment Act to enable individuals aged 65 and 66 to make up to three years of non-concessional super contributions under the bring-forward rule.

This bill, introduced into the lower house on 13 May 2020, progressed to the upper house by 31 August 2020 to await a second reading, which took place today, and following two amendments by Pauline Hanson’s One Nation, received a third reading.

The amendments will remove charges for excess concessional contributions for some superannuation fund members and will allow the re-contribution of COVID-19 early release amounts up to the level of funds withdrawn from super under the relief measure.

In addition, parliament passed the Treasury Laws Amendment (Your Future, Your Super) Bill 2021, which contains a number of measures outlined in the 2021 budget, including stapling funds to members, a requirement that the Australian Prudential Regulation Authority conduct an annual performance test for MySuper products and the introduction of a best financial interest duty for the trustees of superannuation funds.

Late last week, the ATO released its time frames for the deployment of changes within its systems in response to the passing of legislation, stating that in July 2021 it would build and test functionality to enable an increase in fund membership from four to six and in July 2022 build changes into the SMSF annual return and correspondence to support a rise in membership from four to six for the 2022 financial year.

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