When was the last time you updated your SMSF trust deed?

June 1, 2022
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Article published by RJS Wealth Management Pty LtdAn SMSF, as well as being an excellent way to safeguard your retirement on your own terms, is a type of trust. Setting up an SMSF requires lots of documentation, and the trust deed is crucial, because it sets out the rules for establishing and operating your SMSF. It’s a legally binding document, and it should reflect the current Superannuation rules.[caption id="attachment_4474" align="alignnone" width="610"]

Trust Deed

Trust deeds for SMSF should be regularly updated. Source: Adobe Stock[/caption]Super rules are changed frequently, and for lots of reasons, sometimes to prevent inappropriate behaviour, sometimes to remove limits and restrictions. As Super laws change, your SMSF trust deed should change to or risk Trustees being limited from acting on the new changes.In 2016, legislation was passed for 15 changes to Superannuation law which will, if updated in your SMSF trust deed, allow increased flexibility for your accountant and advisor when assisting you to report on and manage your SMSF1.Why is it so important to update your trust deeds?An article in CPA Australia’s blog “In The Black” cites Peter Burgess, head of AMP SMSF. He says you’re not legally obliged to change your deed but it’s a good idea to do so because it gives you flexibility. He uses the example of limited recourse borrowing to buy property. Although the change to law occurred in 2007, unless you’ve updated your trust deed to reflect this, limited recourse borrowing is still not permitted for your fund. Keeping your deed up to date gives you access to all opportunities offered by the current law2.On the other hand, if a particular action becomes illegal and you don’t update your deed, you’ll still get in trouble if you do it. No loophole there.How often should the trust deed be updated?There is a small amount of disagreement on this point. “In The Black” polled the opinion of several SMSF experts, the most enthusiastic suggested three times a year, but once a year was considered sufficient by several other experts including Peter Burgess from AMP, who said a savvy SMSF holder should understand what’s happening in their fund, be aware of when changes would affect them, and make the changes accordingly2.OK what next?There are potentially 15 changes to Super law that were passed in 2016. We suggest that SMSF Trustees should assess if these updates are required in their trust deeds before the 2017 budget.[caption id="attachment_4475" align="aligncenter" width="610"]


Time to get the ball rolling on your SMSF update Source: Adobe stock[/caption]The 15 changes to SMSF Deeds may require for the 2017 Budget changes are to allow 1:1. Internal ‘rollbacks’ pensions to accumulation

  1. Segregation of assets between accumulation and pension phases
  2. Rejection of contributions
  3. Refund of contributions
  4. Trustees to deal with excess transfer balance tax and excess non-concessional contributions
  5. Income streams and Account Based Pension (grandfathered)
  6. Trustees to specify guardians for incapacity and death
  7. The identification of the Power of Attorney when living overseas for more than 2 years
  8. The resettling of pensions with flexible timing without mingling with accumulation account
  9. Reversionary beneficiary nominations
  10. Provisionse for CGT relief
  11. Trustees to deal with segregated and unsegregated assets
  12. For the cessation or retention of Transition to Retirement Income Streams
  13. The calculation of member balances, across different funds
  14. The calculation of internal pension rollbacks to accumulation.

Changing your SMSF deed to reflect the updates above will bring it into line with current Super law and give maximum flexibility to your accountant and advisor. We suggest you contact your advisor, accountant or solicitor to begin the process.The reality of not keeping your trust deed updatedFor anyone running their own SMSF, not updating the trust deed regularly risks the fund not being allowed to carry out its normal activities. Topdocs provides a handy list of reasons why you should update it regularly3 and gives examples of cases where action was initiated in line with Super law but disallowed because the trust deed was not updated. These included commencing a pension when that type of pension did not yet exist within the deed, entering borrowing arrangements without proper authority and adding spouses and children as members when not permitted under the deed.Time to get startedThere’s plenty of time to act before the Budget. Contact your advisor, lawyer, or accountant to begin the process. Get your SMSF trust deed up to date and enjoy knowing that you can operate your SMSF within the full range of Super legislation.Keen to get started? Contact RJS Wealth Management on 1300 256 526.Over to youWhen did you last update your SMSF trust deed? Be honest. Have you been caught out with an outdated deed and suffered as a result?Sources:1. Legal Consolidated – SMSF Updates2. In The Black CPA magazine/blog 2014 – How often do you update an SMSF trust deed3. Topdocs.com – technical article: Do I really need to update my SMSFThis blog has been prepared by RJS Wealth Management Pty. Ltd. ABN 24 156 207 126. RJS Wealth Management Pty. Ltd. is a Corporate Authorised Representative (No. 438158) of Modoras Pty. Ltd. ABN 86 068 034 908 an Australian Financial Services and Credit Licensee (Number 233209). The information and opinions contained in this blog is general information only and is not intended to represent specific personal advice (Accounting, taxation, financial, insurance or credit). No individuals personal circumstances have been taken into consideration for the preparation of this material. Any individual making a decision to buy, sell or hold any particular financial product should make their own assessment taking into account their own particular circumstances. The information and opinions herein do not constitute any recommendation to purchase, sell or hold any particular financial product. Modoras Pty Ltd recommends that no financial product or financial service be acquired or disposed of or financial strategy adopted without you first obtaining professional personal financial advice suitable and appropriate to your own personal needs, objectives, goals and circumstances. Information, forecasts and opinions contained in this fact sheet can change without notice. Modoras Pty. Ltd. does not guarantee the accuracy of the information at any particular time. Although care has been exercised in compiling the information contained within, Modoras Pty. Ltd. does not warrant that the articles within are free from errors, inaccuracies or omissions. To the extent permissible by law, neither Modoras Pty. Ltd. nor its employees, representatives or agents (including associated and affiliated companies) accept liability for loss or damages incurred as a result of a person acting in reliance of this publication.

June 1, 2022

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