POWERED BY MOMENTUM MEDIA
Using SMSFs to control under-18 superannuation
With superannuation now paid to under-18s who work more than 30 hours a week, it may be cost-effective to have the super paid to the family self-managed super fund (SMSF).
That’s according to Peter Townsend, principal of Townsends Business and Corporate Lawyers, who said these small super balances could be better protected from costs in a family SMSF whose costs could be controlled more carefully and shared with the other fund members.
“It seems that it could be convenient, cost-effective and even parentally responsible to have super paid into your existing self-managed super fund,” he said.
“You as their parent and guardian can join them up to the fund, whether that is a public offer fund or an SMSF.”
The fund would need a new investment strategy, Townsend said, as the investment needs of the young person would be different to those that might apply to their parents.
“Such a strategy should not be difficult or expensive to establish,” he said.
Once the child turned 18 and became an adult from a legal standpoint, the child would have the right to choose to leave the SMSF.
“If they choose to remain in your SMSF they will have to become a trustee or a director of the corporate trustee and can no longer rely on you to represent them.”
Townsend said parents could still protect their control of the fund once the child turns 18.
“As the parents will likely have much more in the fund than the children, the size of the parent’s voting bloc ensures their control.
“The constitution of the company should be amended to ensure the parents’ votes, [on the board of the corporate trustee and at a shareholders’ meeting of the corporate trustee], will ensure control is not lost.”
Changes were made to SMSFs last year to allow the number of members to increase from four to six.
Recommended for you
The impact of identity theft and its threat to superannuation savings were highlighted in a case that went before the Federal Court at the end of 2023.
A recent NSW Supreme Court decision is an important reminder that while super funds may be subject to restrictive superannuation and tax laws, in essence they are still a trust and subject to equitable and common law claims, says a legal expert.
New research from the University of Adelaide has found SMSFs outperformed APRA funds by more than 4 per cent in 2021–22.
The SMSF Association has made a number of policy recommendations for the superannuation sector in its pre-budget submission to the government.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
Spire Oaktree Opportunities XI Second Close
61.07 3 y p.a(%)
2
Spire Oaktree Opportunities XI First Close USD
59.21 3 y p.a(%)
3
DomaCom Lot 21 Chellaston Road Munno Para West SA 5115 Australia
31.73 3 y p.a(%)
4
Fidante Credit Suisse Global Private Equity
30.15 3 y p.a(%)
5
DomaCom 4/27 Crombie Avenue Bundall QLD 4217 Australia
26.71 3 y p.a(%)
