Will larger SMSFs lead to more family disputes?
Increasing the size of self-managed superannuation funds (SMSFs) has the potential to give rise to increased disputation between fund members, including death benefit disputes and possibly instances of elder abuse.
That is the assessment of major accountancy group, CPA Australia which has told a Parliamentary Committee that while it does not oppose the Government’s move to increase the maximum number of SMSF members from four to six, it does foresee the potential for problems to arise.
In its submission, CPA Australia cited a number of examples of problems arising from the changes which it said it believed needed to be taken into account.
“By way of example, consider a common family unit comprising parents and up to four children. If all were members of the same SMSF then it would be possible for four of them to decide preferences,” the CPA Australia submission said. “Differences, and sometime rivalries, between family members is common and the larger the family the more likely these disagreements are to occur.”
“What is best for one member may not be best for another and sometimes it can be difficult, and costly, for a compromise to be reached. These differences might be about a member joining or exiting the fund or it may be about particular fund investments or how and to whom a benefit should be paid.”
The submission also foreshadowed possible problems around death benefit nominations, while acknowledging this might not necessarily be the case.
“However, the potential for such disputes to arise is increased, and given that death benefits disputes are an increasing problem for all superannuation funds, a proactive legislative and regulatory solution needs to be considered to address this concern,” it said.
The CPA Australia submission also pointed to governance risks and suggested that “the ATO [Australian Tax Office] works with accountants and auditors to ensure that adequate guidance is provided for trustees to better assess and manage any increased risks that a larger number of members may present”.
Recommended for you
The financial services technology firm has officially launched its digital advice and education solution for superannuation funds and other industry players.
The ETF provider has flagged a number of developments as it formally enters the superannuation space through a major acquisition.
While all MySuper products successfully passed the latest performance test, trustee-directed products encountered difficulties.
Iress has appointed Insignia Financial’s former general manager of master trust and insurance products as its newest CEO of superannuation, who will take over from Paul Giles.
