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Understanding Superannuation for Individuals Under 18
 
 
   

Understanding Superannuation for Individuals Under 18

News | Mehak Gaba | Released: 02/04/2025 | Read: 5 Mins
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Whether you're a teenager, a young adult, or just starting out in your career, understanding superannuation early can be a game-changer for your financial future. It might seem like retirement is a distant thought when you’re young, but setting up your super early is one of the smartest ways to get ahead financially. The earlier you start, the more time your super must grow and work for you.

 

When it comes to a Self-Managed Super Fund (SMSF), all members generally need to be trustees or directors (if there’s a corporate trustee). This ensures that everyone with a financial interest in the fund is actively involved in managing and making decisions about it. However, there is an exception: if a member is a minor (under 18), they cannot act as a trustee of the fund. In such cases, additional requirements must be met according to the SIS Act.

 

Now, let's dive into the rules around minor members:
   

Rules for the Admission of a Minor Member under SIS Act, 1993
   

The trustee of a superannuation fund may allow a minor (under 18 years of age) to become a member of the fund, provided the following conditions under superannuation law are met:

 

1.  Eligibility for Membership:

  • The minor may be a child of an existing member of the fund.
  • All legislative conditions under the SIS Act (Superannuation Industry (Supervision) Act 1993) must be satisfied.

2.  Appointment of a Legal Representative:

  • As required by Section 17A(3)(b) & (c) of the SIS Act, a legal personal representative must be appointed as the trustee for the minor member.
  • Alternatively, a parent or guardian may be appointed as the trustee or as a director of the corporate trustee on behalf of the minor.

3.  Application Process:

  • The trustee may accept an application for the minor to become a member of the superannuation fund.
  • The application must be signed by the parent or legal guardian of the minor.

Important point to consider: If a minor member does not have a parent or a guardian; or legal representative acting as a Trustee of the fund, the fund may become a “Non-complying superannuation fund.”
   

Check if your Trust Deed complies with Allowing a Minor to join fund
   
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  • Admission of a Child Member: Check if the trust deed permits a child member. If it prohibits this, an amendment is required. If silent, consider amending it to clarify the allowance of a child member.
  • Investment Strategy: Assess whether the fund’s investment strategy needs updating, as a child member’s strategy will differ significantly from the parents.
  • Death Benefit Distribution: Confirm the trust deed outlines how death benefits are distributed for minor members. Specify if the benefit goes to the minor’s estate or designated dependents, ensuring compliance with superannuation law.
  • Trust compliances with Superannuation Guarantee (SG) requirements:  The trust deed must include provisions to ensure compliance with the Superannuation Guarantee (SG) requirements for minor members. This ensures that any eligible minor employee receives the mandated superannuation contributions, in line with Australian superannuation laws.
   

Minor Super Journey usually begins when they start working

 
   

The Superannuation Guarantee (SG) kicks in when a minor starts working. Employers are required by law to contribute a percentage of earnings into the super account of employee and this is known as the SG.

 
     1. Do minors under 18 receive super?
         Yes. If they are under 18 & work more than 30 hours a week, employer must pay super contributions.             If they work fewer than 30 hours, super contributions are not required.
 
     2. What are the Superannuation Guarantee (SG) rules for minor?

 

         Under 18: If you work more than 30 hours a week, your employer must pay super.

         18 or over: Regardless of how many hours you work, you're eligible for super.

 

The SG rate for 2024-25 is 11.5% of your ordinary time earnings, which includes base wages, bonuses, and paid leave.
   

Member Transitioning to Trustee Status Upon Turning 18

   
  1. Appointed as Director of Trustee Company / Trustee: The minor must become a trustee or director of a corporate trustee within 6 months to meet the legal requirements of the SIS Act. This can be done by lodging form 484 with ASIC.
  2. Obtain a Director ID: Before being appointed as a director, the individual must obtain a Director ID from the Australian Business Registry Services (ABRS).
  3. Update the SMSF Deed: The SMSF deed must be updated to reflect the member’s transition.
  4. Notify the ATO: Notify the Australian Taxation Office (ATO) about the change of details for superannuation entities using ATO Form NAT 3036.
   

Key Points to Remember

   

When introducing younger members to a family SMSF, it’s crucial to keep their benefits separate from the parents' assets within the fund. This can be achieved by using separate bank and investment accounts. The SMSF accountant or administrator should have the necessary skills and systems to manage segregated investments without incurring significant additional administration costs.

 

If an adult child is not proficient at managing their personal finances, they may struggle within an SMSF environment and would likely be better off staying with a retail or industry fund.

 

There are also risks associated with adding children as members and trustees of your SMSF, as this gives them access to the fund’s resources. A tragic example is the Triway Superannuation Fund case, where a son with a drug addiction withdrew almost all the funds, leaving the parents with a non-complying SMSF and no super savings
   

Inclusion of Minor Members: Provisions and Documentation

   

Trustdeed.com.au supplies proforma documents and annexures in conjunction with our superannuation fund deed, which are specifically designed for use if a minor member is added to the fund in the future. These documents provide a streamlined process for incorporating a minor member into the fund, ensuring that all necessary legal and regulatory requirements are met.

 

Furthermore, our superannuation fund deed includes comprehensive and well-defined clauses that govern the inclusion of a minor member. These clauses are carefully crafted to ensure full compliance with relevant laws and regulations, while also providing clarity and transparency in the process. This ensures that any potential challenges associated with the inclusion of a minor member are proactively addressed, offering both security and peace of mind to all parties involved.
   

Visit www.trustdeed.com.au for more details or call us on (02) 9684 4199
   

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