Increasing the number of members in an SMSF to six may help simplify tax administration and reduce costs for both the ATO and SMSF members, says the Inspector-General of Taxation and Taxation Ombudsman.
6-member SMSFs to reduce compliance costs, says IGTO
In a submission to the Senate Economics Legislation Committee’s inquiry into the Treasury Laws Amendment (Self-Managed Superannuation Funds) Bill 2020, the Inspector-General of Taxation and Taxation Ombudsman (IGTO) noted that the bill will allow an increase in the maximum allowable membership of SMSFs, which may improve tax simplification and reduce costs for the ATO and taxpayers alike.
“In the main, and as noted in the explanatory memorandum to the bill, SMSFs are largely used by families and, at present, the only option for larger families wanting to have their investments and superannuation in an SMSF is to create multiple funds,” it explained in the submission.
This invariably increases the compliance costs for those taxpayers, the submission stated.
“Similarly, an unnecessary increase in the number of SMSFs will also create undue administrative and resource impacts for the ATO in educating and regulating the industry,” it said.
The IGTO also noted in the submission that the new law has the potential to see a reduction in the number of SMSFs within the tax system, which will correspondingly reduce the total revenue received by the ATO from the supervisory levy.
“The committee may be assisted in assessing the financial and regulatory impacts of the proposed law change, by making enquiries with the ATO regarding any forecast reduction in the number of SMSFs as a result of the law change, the corresponding reduction in the total revenue raised from the SMSF supervisory levy and the sufficiency of that revenue to enable the ATO to continue educating and regulating the SMSF sector,” the submission said.