If you’re thinking about setting up a self-managed super fund (SMSF) with a friend, the good news is that you can! SMSFs can actually have up to six members, and they don’t need to be related. However, while it’s legally possible, there are some important considerations before diving in.
How Many Members Can an SMSF Have?
An SMSF can have between one and six members. If you’re setting one up with a friend, you’d both be individual trustees or directors of a corporate trustee. Each member must be actively involved in the fund’s management and decisions, as SMSFs are designed for people who want control over their retirement savings.
Will the ATO Investigate an SMSF with Unrelated Members?
The ATO does not automatically investigate SMSFs just because they include friends instead of family members. But keep in mind all SMSFs are subject to regulatory oversight to ensure compliance with super laws. If the ATO were to notice irregularities—such as poor record-keeping, investment breaches, or conflicts of interest—they may review or audit the fund. Unrelated members may attract more scrutiny in situations where there are signs of non-compliance, such as loans between members or questionable investment decisions that don’t align with the fund’s sole purpose: providing retirement benefits.
Risks of Setting Up an SMSF with a Friend
While a friend can be a trustworthy SMSF partner, there are some risks to be aware of:
- Differences in Investment Strategies – You and your friend may have different risk appetites and retirement goals, which could lead to conflicts over investment choices.
- Relationship Breakdown – If your friendship deteriorates, managing the SMSF can become stressful. Exiting an SMSF isn’t as simple as withdrawing funds; you’ll need to transfer assets, restructure, or even wind up the fund.
- Liability and Compliance Risks – All members are responsible for the fund’s compliance. If one person makes a mistake or fails to meet their obligations, all members can be held accountable.
- Estate Planning Complications – If a member passes away or wants to leave the fund, ensuring a smooth transition of their super balance can be complex, particularly when the remaining members are not family.
Setting up an SMSF with a friend is possible, but it requires careful planning and trust. Make sure you have clear agreements in place, align on investment strategies, and understand the responsibilities involved. Consulting with an SMSF professional can help you assess whether this arrangement is the right choice for you.
