How are members balances calculated?

All Members of a SMSF have a proportional interest in the SMSF assets based on every contribution, allocated against a particular member. This means that if one Member contributes 100% of monies to the SMSF and a second Member contributes no monies, then the Member making the total contributions to the SMSF will own 100% of the SMSF assets. Similarly if one Member contributes say $60,000 to the SMSF and the other Member contributes say $40,000 to the SMSF, then Member 1 will own 60% of the SMSF Assets and Member 2 will own 40% of the SMSF Assets.

As the member adds money to the pool in higher proportion to fellow members, their percentage of the funds balance is increased.  This percentage is multiplied against all income of the fund, capital gains/losses and market increases to create a members balance.  When money is withdrawn out of the fund by the way of pensions, it reduces the percentage of member’s percentage of the pool and therefore their member balance will reduce not just by the pension withdrawn amount, but by also as a proportion of the income, capital gains. Members are exposed not only to income, but also to expenses of the fund.  As a member if you have a high percentage of the fund, then you will pay the highest proportion of the expenses.  Expenses are not split evenly between members, they are always proportioned in line with the member’s percentage.

It is a legal requirement to correctly allocate the members balance in the method described above.