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Is now the time to update your SMSF deed?

The Cleardocs self-managed superannuation fund (SMSF) trust deed and associated product disclosure statement (PDS) is being updated in order to reflect new legislative requirements and a recent decision of the High Court of Australia. The updates include changes to death benefits provisions, forfeiture accounts, caps and rates, and electronic signing and execution clauses. This article explains the importance of keeping your SMSF trust deeds up to date, and what these changes mean for SMSFs.

Stephen Dyason, Maddocks

Why is it important to keep trust deeds up to date?

A SMSF trust deed is an SMSF’s most important legal document as it contains rules for the operation and management of the fund. The SMSF trust deed and superannuation laws together form a fund’s governing rules, with the trust deed setting out what trustees can do, while legislation typically sets out what trustees cannot do or what rules must be followed when exercising trustee powers.

Trustees have an obligation to ensure they make decisions based on current laws, even if those laws have not yet been reflected in the trust deed. An old SMSF trust deed which has not been updated, could result in a trustee inadvertently acting upon outdated rules, risking ATO investigations and penalties for non-compliance with current legislative requirements.

Without an up-to-date SMSF trust deed, the trustee may not be able to fulfil its obligations without being in breach of the trust. For example, in acting in the best interests of the trust, a trustee may wish to invest in a new type of investment such as cryptocurrency. However, if this type of investment is not allowed under the fund’s trust deed, the beneficiaries could take action against the trustee (or third parties such as accountants or financial planners) for any resulting losses and damage.

As a trust deed is often used as the tool to guide decision making and administration of the trust, reviewing and updating the trust deed regularly will help to proactively prevent any breaches and ensure you are getting the most out of the SMSF.

When should trust deeds be reviewed?

Generally, a SMSF trust deed should be updated every 3-4 years to ensure that it is complying with all legislative requirements. However, there are a number of other important junctures at which updating a SMSF deed is highly recommended:

  • When significant legislative changes are made: For example, changes to superannuation law, tax law or corporations law. Significant changes to superannuation legislation were made in 2017, which means that SMSF trust deeds drafted prior to this are likely to contain outdated provisions.
  • When important case law is decided: For example, the High Court recently clarified that that binding death nominations under an SMSF deed do not expire after 3 years, and can instead bind the trustee until replaced or revoked.
  • On admission of new members: It is crucial that new members are provided with an up-to-date deed and PDS.
  • When making important investment changes (e.g. investment in a new asset class): A trust deed contains the powers of a trustee to make an investment. Over time, the types of investments which this may include has expanded to cover block chain, cryptocurrency and different types of derivatives. These types of investments must be allowed under the fund’s trust deed and be in accordance with the fund’s investment strategy to permit trustees to invest in them.
  • Upon starting pension payments: To ensure that estate planning is complete, upon putting a new pension in place it is important to update the trust deed, document the pension in a pension payment agreement, and make sure all death benefit, fund and estate planning documents are consistent and complement one another.
  • When changes are made to estate planning: A fund’s documents should be consistent with and complement a new will or estate and succession plans.

Key recent and upcoming updates

In March 2022, the Cleardocs Standard SMSF Deed was updated to make changes to rates and caps to reflect legislative changes to contributions rules, as well as annual changes to contribution caps, benefits rules and thresholds, transfer balance cap limits, co-contribution rules, catch-up contribution rules for non-concessional contributions and low-income spouse offset rules. Signing clauses were also updated to reflect best practice execution of the SMSF deed by companies.

In December 2022, the Cleardocs Standard SMSF Deed will be further updated with the following:

  • Death benefits provisions: In 2022, the High Court finally clarified the position on binding death benefit nominations, ruling they do not need to expire after 3 years for SMSFs. Cleardocs customers can now choose a binding nomination which does not expire, or a death benefit agreement. The SMSF deed, PDS and pension PDS will all be updated to explain the updated rules.
  • Forfeiture accounts: Forfeiture provisions have been removed as very few SMSFs still require these provisions.
  • Caps and rates: The SMSF deed and PDS have been updated to reflect legislative changes to contributions rules, as well as annual changes to contributions caps, benefit rules and thresholds, transfer balance cap limits, co-contribution rules, catch-up contribution rules for non-concessional contributions and low-income spouse offset rules.
  • Electronic signing provisions and execution clauses: Trustees which are corporations, and individuals in some states, are now permitted to sign deeds by electronic means, under new permanent legislative changes. All execution clauses for SMSF deeds (and related documents including Deeds of Variation) have been updated to reflect the 2022 changes to company execution rules under the Corporations Act and these new electronic signing laws. Our Guide dealing with these changes can be found here.

How Cleardocs can help?

The Cleardocs SMSF trust deed is reviewed regularly to ensure it is up to date with the latest requirements and best practices.

Update to SMSF enables you to easily update your deed to the most current version, and the Bulk Updates feature enables you to update multiple deeds at once. Even if you don’t currently have a Cleardocs Deed, you can still update to a compliant Cleardocs deed, even in bulk.

More information from Maddocks

For more information, contact Maddocks on (03) 9288 0555 and ask to speak to a member of the Corporate and Private Clients team.

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Lawyer in Profile

Leigh Baring
Leigh Baring
Partner
PH: 61 3 9258 3673

Leigh is a partner in the Maddocks Tax & Revenue team.

Leigh regularly provides advice on:

  • structuring of businesses and transactions;
  • mergers and acquisitions;
  • corporate reorganisations and distributions;
  • sale of businesses;
  • demergers;
  • capital raisings;
  • joint ventures and property developments;
  • international tax (both inbound and outbound);
  • succession planning; and
  • liquidations.

His advice covers both direct and indirect tax considerations.

Leigh advises Australian and multinational companies, high net worth individuals, accountants and financial advisers on all areas of taxation law.