Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Register

26 August 2026

Home / Caveat Emptor

Why only four members in an SMSF?

Question from Stuart Wilson

I would like to know why SMSF's are limited to less than 5 members. My family has in excess of 4 people in it and when including siblings spouses and children, many, many more than 4.

We currently have 4 separate SMSF's which quadruples the costs and time involved in managing the funds. As a very hands on SMSF trustee, we manage all of the investments and try to complete as much of the accountancy work as we can before handing the accounts to the accountant but the costs are still 4 times what they would be if we could run a single SMSF with more members.

Many articles and companies highlight the minimum investment required in a SMSF to make it viable when considering costs, surely and increase in the number of members allowed would enable more people to benefit from establishing a SMSF.

The restriction on membership seems to be an added cost to those people wanting to establish a SMSF.

Thanks, Stuart Wilson

Reply from Ramani Venkatramani, who is an actuary and between 1996 and 2011, he was a senior executive at ISC /APRA, supervising pension funds.

SMSF's predecessor, 'the excluded fund' was regulated by Insurance and Superannuation Commission with all other complying funds, with the idea that those who wish to control their own retirement savings should be able to do so, with basic requirements being met. It was considered that in order for the control to be properly exercised, the number of members should not exceed 4, as the option of going into the bigger sectors (corporate, industry or retail) was open.

Wallis Committee in 1997 recommended its continuation with the regulation shifting to ATO and a prohibition on trustee remuneration. The limit of 4 was retained.

 

While the number 4 itself is arbitrary, the idea is to keep it small and manageable. The possibilities of lifting the number, or changing the definition (to say, all members of a family regardless of number) were suggested during the Cooper review but were not accepted.

 

As there is no limit on how many SMSFs can be set up by someone, for more than 4, two or more SMSFs can be used under the current limit.

(We have also approached ASIC for a response).

  •   3 December 2013
  • 3
  •      
  •   
3 Comments
Andrew Bloore
December 04, 2013

This has been an issue which has been discussed over and over and the answer has been the same every time, no change to the numbers. In fact the outcome of this restriction has not been a growth in the number of member it has actually seen the number of members on average decline from 15 years ago when it was approximately 2.2 member on average per fund to where it is today at 1.9. That said families need solutions. There are two different issues here, the first being the tax and structural issues of the fund and who can be a member of it (to a maximum of 4, or more technically correct, fewer than 5) and secondly how to simply manage the assets of the funds efficiently.

Having 2 funds does not necessarily mean you need to duplicate the investment process into two funds. For example you can set up a bare trust to hold all of the assets of many funds and invest them from 1 single pool to make the investment management of the assets simple. Say you have 10 members in the family, you obviously need at least 3 fund structures but you can invest via 1 holding or bare trust and simply account for the position in each tax entity in their correct proportion. This really is a simple administration function. Yes you still need 3 tax returns (one for each fund) but it dramatically reduces the administration time from an accounting point of view and simplifies the Trustees lives. Furthermore the SIS Act specifically allows the trustees to appoint an investment manager - say a patriarch, who can be responsible for managing the group assets.

Everyone seems to focus on the issue of the 4 members rather than saying well if we can only have four members how do I make my life as easy as possible within the legislation. What ends up happening is each fund ends up with different assets and one person trying to work of what goes where. There are simple solutions to all this. As always go to a superannuation professional administrator and ask how to make the fund work for you, not the other way around.

Christopher Dodson
January 11, 2017

Hi Andrew,

I am interested in your comment as I do not believe it is possible for related SMSF's to invest in a bare trust or unit trust which holds anything other than property and cash.

Are you able to provide references on how this can be completed?

Philip La Greca
December 19, 2013

The other rationale for the limit relates to how the decision-making process works in the multi-member funds and the number of members that could be overridden.

The SIS law does not specify so the general principle is a majority of trustees/directors rules. Thus with a two member fund both must agree, for a three member fund then two out of three and for a four member fund three out of four. In these cases then only ever one person's wishes are not met. If we take this to five members however then we end up with three out of five so more members are not satisfied with the outcome.

This would require a statutory basis for decision-making and anything else than a unanimous decision would always result in some low cap of member numbers. Even 75% for a 10-member fund would mean two outvoted members.

If you consider how difficult it is to get 5 people to agree on how to split a lunch bill consider the outcomes when you are talking about peoples retirement savings.

 

Leave a Comment:

RELATED ARTICLES

Lending policies can spoil good SMSF strategies

Meg on SMSFs: Winding up market linked pensions with care

Does a declaration of trust satisfy SMSF separation of asset regulations?

Firstlinks is sponsored by:
banner

Most viewed in recent weeks

Are you making these SMSF mistakes?

After four decades advising investors, there are a few common mistakes I've seen SMSF investors make. From holding too much cash and chasing yield to overtrading and trusting tips. Are these errors costing you?

Why have Australian living standards 'fallen' and how do we fix it?

For the last few years there has been much talk of a 'cost-of-living' crisis in Australia and of 'falling living standards'. Lately this has flared up again with the pickup in inflation resulting in a renewed fall in real wages.

Retirement spending is not one-size-fits-all

New data challenges the idea that Australians are underspending their super. The bigger issue may be helping retirees navigate complexity, make confident decisions and use their savings to support security, wellbeing and choice.

Will you run out of money in retirement?

Fear of running out has become a defining retirement anxiety. Why do some retirees die with substantial wealth while others deplete their nest egg? Evidence suggests the answer is more complicated than we think. 

Four options for an income investor’s next dollar

What if Australia’s golden age of dividends is ending? Rather than overhaul your portfolio, it may be worth considering where new capital can work harder. I discuss four income strategies and the trade-offs behind each.

The missing link in the CGT debate

A little-noticed consequence of Labor’s tax changes could have implications well beyond investors’ tax bills. The issue raises bigger questions about incentives, capital allocation and the drivers of long-term economic growth.

Latest Updates

SMSF strategies

Meg on SMSFs: What do we think about reversionary pensions these days?

Reversionary pensions have long been a staple of SMSF estate planning, but are they still the best option? Meg Heffron revisits a once-clear favourite and asks whether changing super rules have shifted the balance.

The ageing ‘crisis’ has not and will not happen

Rising age dependency is frequently treated as a warning sign for economies. But when actual workforce participation is examined, a strikingly different picture emerges about ageing, productivity and economic sustainability.

Retirement

How does the 4% rule stack up?

The 4% rule has long been retirement's gold standard. But after a difficult period for investors, fresh analysis suggests a more conservative approach may significantly improve the chances of making savings last.

Shares

Four charts that expose market concentration risk

Investors have recently been rewarded for backing market leaders, but history suggests this eventually comes at a cost. Now may be the time to review whether your portfolio is carrying unintended risks beneath the surface.

Investment strategies

The case for gearing beyond property

Most Australians gear into property but ignore shares. That may be a mistake. Used carefully, geared equity strategies can enhance long-term returns, reduce cash tied up in growth assets and support retirement income goals.

Economy

Australia's $1 trillion debt pile

The headlines exclaiming that Australian government debt has hit A$1 trillion and US government debt has hit $40 trillion has turned heads, but how serious are they really? Will Australia's mix of debt create challenges?

Economy

Has 100 years of growth made us any happier?

For decades, GDP has been the benchmark for economic success, but has it made us materially happier? If happiness does not rise in lockstep with prosperity, are we overlooking what constitutes a successful society?

Sponsors

Alliances

  • ASA-Logo-RGB-ActiveGreen-web.png

Site Map

About Firstlinks

© 2026 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.