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INFORMATION
FOR FUNDS WITH LESS THAN 5 MEMBERS
The
information provided below is only a summary of
the main provisions dealing with the establishment
of SMSFs and SAFs. It is not to be taken as a
substitute for professional advice. Severe penalties
may apply to a trustee, director of a corporate
trustee and to the fund where a fund with less
than 5 members does not satisfy the conditions
of either an SMSF or an SAF
WHAT
IS A SELF-MANAGED SUPERANNUATION FUND ("SMSF")
Definition
Generally,
for funds other than single member funds, an SMSF
is one where:
| • |
There
are fewer than 5 members; |
| • |
All
members are trustees, or directors of the
trustee company; |
| • |
There
are no trustees or directors who are not members;
|
| • |
There
are no members who are employees of other
members (unless they are relatives); and |
| • |
No trustee of the fund receives any remuneration
for his or her services as a trustee. |
For funds that are single member funds, an SMSF
is one where:
| • |
If
the fund has a corporate trustee:
| • |
the
member must be the sole director of
the company; |
| • |
the
member must be one of only two directors
where the other director is a relative;
or |
| • |
the
member must be one of only two directors
and not an employee of the other director;
|
|
| • |
If
the fund does not have a corporate trustee;
| • |
the
member must be one of only two individual
trustees and the other trustee must
be a relative; or |
| • |
the
member must be one of only two individual
trustees and not an employee of the
other trustee. |
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There are, however, some exceptions to these general
rules. For full details of the definition of an
SMSF refer to Section 17A of the Superannuation
Industry (Supervision) Act 1993.
What
is the Definition of Employee
The
term employee has its general meaning at law but
a member who is an employee of an employer-sponsor
is also defined, in the case of an SMSF, to be
an employee of:
-
Any relative of an individual employer-sponsor;
-
Any director of an employer-sponsor company
and any relative of those directors;
- Any
beneficiary of an employer-sponsor trust and
any relative of those beneficiaries; · Any partner
of an employer-sponsor partnership and any relative
of those partners;
- Any
director (and his or her relatives) of a company
that is a partner in an employer-sponsor partnership;
- Any
beneficiary (and his or her relatives) of a
trust that is a partner in an employer-sponsor
partnership;
- A
person prescribed in the Superannuation Industry
Supervision (SIS) Regulations.
In short, this means that the above individuals
cannot be in the same SMSF as the employee member
unless they are relatives. A relative is defined
widely, in relation to an individual, to mean:
| (a) |
a
parent, child, grandparent, grandchild, sibling,
aunt, uncle, great-aunt, great-uncle, niece,
nephew, first cousin or second cousin of the
individual or of his or her spouse or former
spouse; or |
| (b) |
another
individual having such a relationship to the
individual or to his or her spouse or former
spouse because of adoption or remarriage;
or |
| (c) |
the
spouse or former spouse of the individual,
or of an individual referred to in paragraph
(a) or (b). |
SMALL
APRA FUND ("SAF")
A fund with fewer than 5 members which is unable
to comply with the definition of an SMSF must
appoint an approved trustee and become a SAF if
it wishes to comply with the legislation and have
tax concessional status.
An
approved trustee must have at least $5 million
in net assets and must be approved by APRA as
having sufficient skills and competence to act
in this capacity.
Funds
with fewer than 5 members that do not have an
approved trustee, and also do not meet the definition
of an SMSF, are strongly advised not to make an
election to become a regulated superannuation
fund. The trustees of such a fund will be at risk
that APRA would appoint a replacement trustee.
LEAVING
THE FUND
If
the fund is a SMSF then under the provisions of
the trust deed, a person that ceases to be a Member
shall cease to be a Trustee or a director of a
corporate Trustee (unless determined otherwise
by the other individuals acting as Trustee or
the other directors of a corporate Trustee) and
a person that ceases to be a Trustee or director
of a corporate Trustee shall cease to be a Member
(unless determined otherwise by the other individuals
acting as Trustee or the other directors of a
corporate Trustee).
This
information is based on current law as at and
is subject to change.
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