Expert SMSF insights

13 Sep, 2018

Why it’s important to keep a trust deed current

By Graeme Colley

Graeme Colley SuperConcepts SMSF expert

Keeping your fund’s trust deed up to date is an ongoing responsibility especially with all the recent changes. The proposed introduction of triennial audits for some SMSFs and the increase in the maximum number of SMSF members announced in this year’s Federal Budget are just two changes that come to mind. 

It can also be important to ensure your fund’s trust deed is up to date in light of new and emerging investments such as digital currency. If the trust deed does not provide the express power to invest in these types of assets, an SMSF may not be permitted to do so.

But it’s not only legislative and investment changes you need to keep an eye on – as the courts and tribunals are dotted with endless cases where a poorly drafted or ambiguous deed provision, or an incorrectly executed deed amendment, has led to the member or trustee taking the wrong route.

A previous deed amendment which has not been done correctly could mean all deed upgrades done thereafter are invalid. This could include any binding death benefit nominations and other trustee or member actions which rely on the upgraded deed. It could also mean the current trustees of your fund are not who you think they are, and death benefits ending up in the wrong hands despite the known intentions of the deceased member.

When the trust deed for an SMSF is drafted or amended the law requires that it must be done by a qualified lawyer who will undertake an examination of the documents to ensure they are legal. The lawyer will check to ensure the amendment is permitted and has been done in accordance with the variation power in the deed. They will also trace the changes to the fund rules back to the original deed that established the fund or any replacement, and make sure that every subsequent amendment is valid.

If the deed has not been amended correctly, it can mean a provision in the trust deed such as those covering a binding death benefit nomination or trustee replacement on a member’s death may not be valid and could be subject to challenge. Also, if the amendment or trust deed has been made by an unqualified person and is invalid or deficient, any compensation that is sought may be limited if that person’s professional liability insurance does not cover the change.

A poorly or incorrectly drafted deed may result in expensive litigation where amendments are not being varied by a qualified lawyer. SuperConcepts uses the services of qualified legal practitioners to draft SMSF trust deeds, amendments thereto and any other legal documents. These are written and checked by a lawyer to make sure the document is authorised by the original deed and each subsequent amendment.

Having a trust deed reviewed regularly so that it incorporates the latest changes to the legislation and interpretations by the courts can provide you with peace of mind that the deed is robust enough to withstand challenge, especially when you are not around to make decisions.

An upgrade is a great way of ensuring the fund’s trust deed plus any amendments are valid and that the deed incorporates all the latest legislative changes and supports the latest SMSF strategies.


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