Why you need an up-to-date superannuation fund trust deed

By Victoria Kogan

The Trust Deed for a self-managed superannuation fund (SMSF) is important, as it sets out all the rules for the fund. If it’s not up to date, you may have problems.

The ATO tells you what you can do, what you must do and for what you are responsible as a trustee.

Risks of an outdated Trust Deed

The trustee may inadvertently act on outdated powers in their Deed. Conversely, trustees may be unable to exercise certain powers due to a lack of current provisions in the Deed. If this happens, trustees risk incurring audit breaches that could lead to ATO investigations and sanctions.

Six reasons to update a Trust Deed

1. Flexible pensions
Many older SMSF Deeds have inflexible pension payment provisions. These will not contain powers that permit SMSF trustees to pay pensions that comply with superannuation law.

2. Reversionary Beneficiary Pensions
Old Deeds may not allow for reversionary beneficiary pensions to be paid on a member’s death, risking the continuation of a member’s current pension to a spouse or child. However, most new deeds will allow Automatic Reversionary Pensions.

3. Transition to Retirement Pensions (TTR)
Under current legislation, TTRs can begin when a member reaches preservation age (i.e., from age 59). Up to 10% of the balance can then be accessed annually. Older Deeds may only allow for a pension to commence once the member has retired or reached the age of 65.

4. Death Benefit Payments
To create certainty about death benefits, a binding death benefit nomination (BDBN) can be put in place, detailing who is to receive your benefits.

5. Commutation Authorities
An updated Deed must ensure trustees have the power to pay various taxes, including the excess transfer balance tax and excess non-concessional contributions tax, even without the consent of the member. This includes the ability to refund excess contributions to the ATO.

6. Six Member SMSFs
According to the latest legislation changes, the definition of an SMSF now requires a maximum of six members (instead of fewer than five). And at least half of the trustees or directors of the trustee company must now sign certain fund and regulatory documents. Your updated Deed should reflect these important changes.

EQ8 can help you update your SMSF Trust Deed to protect your interests and to get the most from your SMSF.