SMSF member limits and the increase to six members
From 1 July 2021, the maximum number of members in an SMSF increased from four to six. This change, introduced by the Treasury Laws Amendment (Self Managed Superannuation Funds) Act 2021, was designed to give larger families more flexibility in managing their superannuation through a single SMSF.
All members of an SMSF must be either individual trustees of the fund, or directors of the corporate trustee. This means that if your SMSF has six members and individual trustees, all six members must be trustees. If the fund has a corporate trustee, all six members must be directors of the trustee company. The exceptions are narrow: a legal personal representative can act in place of a member who has died, lacks capacity or has given them an enduring power of attorney, a parent or guardian acts for a member under 18, and a single-member fund can have a second trustee or director who is not a member.
The increase to six members creates practical opportunities. A family with two parents and four adult children can now manage their superannuation through a single fund, reducing administration costs and allowing for a pooled investment strategy. It also allows for more complex intergenerational planning within a single fund structure.
However, more members also means more complexity. Each member must hold a Director Identification Number (if the fund has a corporate trustee). The investment strategy must take into account the different risk profiles and retirement timelines of all members. Distribution of assets on death or exit becomes more complex. And the compliance obligations, annual accounts, audit, and tax return, must account for all members.
If you are considering adding members to an existing SMSF, the trust deed must permit more than four members (many older deeds were drafted with a four-member cap and will need to be varied). The trustee structure may also need to change, for example, if the fund currently has individual trustees, it may be more practical to switch to a corporate trustee when adding a fifth or sixth member.
Frequently asked questions
Can I add a fifth member to an existing SMSF?
Only if the deed permits more than four members. Many deeds written before 1 July 2021 contain a hard four-member cap and need a variation first. Adding a member without checking the deed risks a contravention that surfaces at audit.
Should a six-member fund use individual trustees?
It is permitted but impractical. Six individual trustees means every fund asset is registered in six names, and every membership change requires re-registration of all of them. A corporate trustee handles the same change as a directors update, which is why larger funds almost always use one.
What are the downsides of adding members to an SMSF?
Divergent risk profiles and retirement timelines complicate the investment strategy, death and exit arrangements become harder to document, and the annual accounts, audit, and return must account for every member. The administrative saving from pooling has to be weighed against that complexity.
This article is general information only and does not constitute legal, financial, or tax advice. While we endeavour to keep content accurate and current, laws and regulations change frequently. For advice specific to your circumstances, please consult a qualified professional adviser. CoSec Partners Pty Ltd accepts no liability for actions taken based on this content.