Who can set up an SMSF together?
Just about anybody can set up an SMSF together.
Most SMSFs include family members. The most common family fund includes a husband and wife or a defacto couple. A SMSF can even be set up with a sole member and it is not uncommon for business partners and their spouses to set up a fund together.
However, when going beyond family members it is critical that no member of the fund can be an employee of another unless they are relatives. Unable to meet this condition means the fund fails the definition of being a SMSF and denied access to the tax concessions available to a SMSF and its members.
Who is an employee?
This can become complicated as the super laws (SISA) extend the meaning of what we typically believe an employee to be, checkout the link to the Act here:
For instance, a director of a company is considered to employ the staff engaged by the company as part of a business being carried on. A director is generally considered to be an employee of the company.
Are the directors of a corporate SMSF trustee employees of each other?
No as whilst it looks like they should be there is an exemption which deems the directors not to be employees of each other allowing them to be in the same SMSF. Keeping in mind that all members of the fund are also generally required to be trustees or directors of the corporate SMSF trustee.
What if the directors employed their spouses in the business but the spouses are not directors?
The spouses are employees of both directors. Each spouse is related to one of the directors but is also an employee of the other director. A member related to one of the directors is deemed not be employed by the other director. Therefore, in this situation the two couples can set up a SMSF together.
Example – Tim and Freda are husband and wife, and Dick and Pauline are husband and wife. Tim and Dick set up a company to sell vending machines to the public. Tim and Dick are the directors of the company, FP Pty Ltd. Freda and Pauline are employees of FP Pty Ltd keeping the company’s records and general administration. Tim and Dick are paid directors as well as managing the operations.
Tim, Freda, Dick and Pauline can all be members of the same SMSF.
Tim and Dick are deemed not to be employees of each other as they are both directors. Freda is a relative of Tim and is deemed not to be employed by Dick. Pauline is a relative of Dick and is deemed not be employed by Tim.
Other examples of people who can be in the same SMSF
- My children can belong to my SMSF – children under 18 can be a member but will be under a legal disability and can’t be a trustee until they turn 18. Meanwhile, a parent can act as trustee on their behalf
- Jo and Arthur are a same sex couple
- Kaylee and Mitchell are friends, not related and neither are employed by the other member
- Fred and his ex-wife Marjorie
Examples of people who cannot be in the same SMSF
- Sandra owns a hairdressing salon and employs Zoe and Jane – Sandra, Zoe and Jane are not related and cannot be in the same SMSF as Zoe and Jane are employees of Sandra
- Charlie and Owen are directors of “Charlie’s Tyres Pty Ltd” and employ Dean as the manager of the business – None of them are related – Dean cannot be a member of the SMSF as he is an employee of Charlie and Owen
- There are other persons generally restricted from being involved in an SMSF such as those convicted of an offence including dishonesty, checkout the ATO website for more information: