Key takeaways
- An SMSF can have up to six members, and membership can change over time.
- Adding or removing a member also changes who is a trustee or director.
- With individual trustees, asset titles must be updated; with a corporate trustee, you change directors.
- A departing member's balance is paid out, rolled over, or kept as a pension, depending on circumstances.
Membership of an SMSF is not fixed. Children join as they start working, a spouse comes in, or a member leaves after a separation or to simplify their affairs. The fund continues; what changes is the membership and, with it, the trustees.
Adding a member
To add a member, the trust deed must allow it, and the fund must stay within the six-member limit. The new member is admitted, and because every member must be a trustee or director, they are also appointed in that role. They sign a consent to act and the ATO trustee declaration. Their super is then rolled in or contributed.
Removing a member
A member can leave for many reasons. The steps are to deal with their benefit, then to remove them as a trustee or director. Their balance is generally rolled over to another fund, paid out if they have met a condition of release, or retained in the fund as a pension. The order matters: sort the benefit and the paperwork together so the fund stays compliant throughout.
Why trustee structure matters here
This is where the choice of trustee shows its value. With individual trustees, every asset of the fund must be retitled to reflect the new line-up of trustees, which is slow and, for property, can be expensive. With a corporate trustee, you simply change the directors, and the asset titles, held in the company's name, stay put.
Keep the records straight
Whichever change you make, document it: trustee minutes recording the decision, consents and declarations for new trustees, and updated ATO records. Membership changes are a common point for paperwork to fall behind, and auditors look for the trail.
Frequently asked questions
- How many members can an SMSF have?
- Up to six. Every member must be a trustee, or a director of the corporate trustee, so adding a member also adds a trustee or director.
- What happens to a member's balance when they leave?
- It is generally rolled over to another fund, paid out as a benefit if they have met a condition of release, or kept in the fund as a pension. The right path depends on their age and circumstances.
- Why is removing a member easier with a corporate trustee?
- Because you change the company's directors rather than retitling every fund asset. With individual trustees, each asset must be transferred into the names of the remaining trustees, which is slower and can cost more for property.
