Referral of the inquiry
The Treasury Laws Amendment (Self Managed Superannuation Funds) Bill 2020 (the bill) was introduced in the Senate and read a first time on 2 September 2020.
On 3 September 2020, the Senate referred the bill to the Economics Legislation Committee (the committee) for inquiry and report by 4 November 2020.
Purpose of the bill
As explained in the bill's Explanatory Memorandum (EM):
… the bill amends [a number of Acts] … to increase the maximum number of allowable members in self-managed superannuation funds (SMSFs) from four to six. Th[e] bill also amends provisions that relate to SMSFs and small Australian Prudential Regulation Authority (APRA) funds … to ensure continued alignment with the increased maximum number of members for SMSFs.
During the 2018-19 Budget, the Australian Government announced that it would increase the maximum allowable members for SMSFs.
The EM states, the rationale for 'increasing the allowable size of these funds [is to enhance]… choice and flexibility for members'. The EM notes that, 'currently, the only real options [for superannuation for larger families] are to create two SMSFs (which would incur extra costs) or place their superannuation in a large fund'. Expanding the maximum size of SMSFs would facilitate larger families including additional family members in a SMSF.
The existing definition of a 'self managed superannuation fund' is contained in section 17A of the Superannuation Industry (Supervision) Act 1993 (the SIS Act). This definition currently requires SMSFs to have fewer than five members, and trustees of a SMSF to be members of the SMSF.
The EM outlines that 'the SIS Act also contains provisions dealing with small superannuation funds, with the threshold for small funds set at the same level as the member limit SMSFs'. The EM notes that:
… some of these provisions apply to all superannuation funds that have fewer than five members. Other provisions are limited to small funds that are not SMSFs ('small APRA funds').
Provisions of the bill
The bill is set out across three clauses and one schedule.
Increasing the maximum number of members
The bill increases the number of members referred to in the definition of a 'self managed superannuation fund' in the SIS Act from 'fewer than 5 members' to 'no more than 6 members'.
To ensure consistency across legislation, the bill further amends the SIS Act and the Corporations Act 2001, Income Tax Assessment Act 1997 and the Superannuation (Unclaimed Money and Lost Members) Act 1999 to bring them into line with the increased maximum number of members.
The bill amends the Superannuation Industry (Supervision) Act 1993 account and statements sign-off requirements, to align with the increase in the maximum number of SMSF members. The accounts and statements of a SMSF with one or two directors or trustees must be signed by all directors or trustees and all other SMSFs must be signed by at least half of the directors or trustees.
Commencement of the bill
The amendments apply from the first day of the first quarter after the bill receives Royal Assent.
According to the EM, 'the amendments are estimated to have no revenue impact over the forward estimates period'.
The EM states '[t]he amendments are estimated to have a minor regulatory impact on business, community organisations or individuals'.
When examining the prior bill—Treasury Laws Amendment (2019 Measures No. 1) Bill 2019—the Standing Committee for the Scrutiny of Bills previously made no comment on increasing the maximum number of SMSF members.
Compatibility with human rights
The Parliamentary Joint Committee on Human Rights made no comment on this bill thereby indicating that the bill 'do[es] not engage or only marginally engage, human rights; promote human rights' and/or permissibly limit human rights'.
In addition, the EM states the 'bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011'.
Conduct of the inquiry
The committee advertised the inquiry on its website, and wrote to relevant stakeholders, and other interested parties, inviting submissions by close of business 18 September 2020. The committee received total of nine submissions.
The committee thanks all individuals and organisations who assisted the inquiry, especially those who made written submissions.