The trust deed for a Self-Managed Superannuation Fund (SMSF) is vitally important as it contains the rules for the operation and management of the fund. Despite its importance, SMSF deeds are often not reviewed regularly. If a deed is not reviewed or updated regularly, it may not comply with changes in legislation.
Superannuation laws frequently changing, and an outdated SMSF deed could restrict a trustee’s powers or result in a trustee not complying with current legislative requirements, which can have serious consequences.
Some of the most significant changes to superannuation laws that may require your SMSF deed to be updated are:
- Binding Death Benefit Nominations (BDBNs): If your SMSF deed is dated prior to 1999, it is unlikely you will be able to make BDBNs and the deed should be updated. BDBNs allow you to direct who your death benefit should be paid to upon your death. This tool is vital for estate planning, as it enables you to direct the death benefit to be paid directly to one or more of your dependents or to your estate. BDBNs must be prepared in accordance with the terms of the SMSF deed or they may otherwise be deemed invalid.
- Account-Based Pensions: The superannuation reforms introduced account-based pensions in 2007. If you are relying on a SMSF deed that has not been updated since these changes were introduced, then you may be restricted in the type of pension that you can commence. Deeds dated before 2007 should be updated so that account-based pension provisions will apply.
- Transfer Balance Caps: In 2017, transfer balance caps were introduced, placing a $1.6 million cap on amounts that could be transferred towards funding a pension in retirement phase. Changes to transition to retirement pension rules also commenced. SMSF deeds dated prior to 2017 should be reviewed to ensure compliance with transfer balance cap requirements.
It is also important to review your SMSF deed before you make any major decisions such as commencing a pension, entering into a borrowing arrangement, making substantial contributions or preparing a BDBN.
Additionally, your SMSF deed should also be reviewed as part of your estate planning to check for provisions that allow for death benefits to be paid by way of a lump sum, or an income stream pension, or through an in-specie transfer of a particular asset (that is the transfer of an asset in its current form).
Regularly reviewing and updating your SMSF deed is necessary to ensure it complies with legislative changes and is fit for purpose.
Kylie Wilson is a SMSF Specialist Accredited Adviser and would be happy to assist with a review and/or update of your SMSF deed.
Written by Kylie Wilson, Partner, and Deborah Johnson, Associate, Sparke Helmore Lawyers.
Since 1882, Sparke Helmore has been providing legal services to Australian businesses. That represents 140 years of success through bringing our experience and knowledge to our clients. We are a truly national full service firm with offices in all mainland capital cities and strong connections throughout regional Australia. Our strong history, underpinned by extensive experience means our firm is well placed to assist our clients to achieve the best business results across all phases of the business lifecycle, whether this be acquisitions and disposals, land related dealings, business structuring, intergenerational succession, intellectual property and technology matters, cybersecurity, employment, work health and safety or taxation.
Disclaimer
The views expressed in this content are those of the author, who is also responsible for any errors and omissions. Family Business Association provides this article for your information only. The content of the article should not be taken as advice. If you wish to explore this topic, please consult an advisor who you consider to have the expertise to provide specific advice in relation to your family business.
