A self managed superannuation fund (SMSF) is ruled by a trust deed. Simply said, the SMSF trust deed sets out the rules of the fund. The deed outlines all regulations members (trustees) must follow, and should not contain any clauses which can lead to the members breaching the SIS Act. The trust deed can be changed virtually any time, but members must follow the guidelines outlined in the original SMSF trust deed. Further, the deed can’t be revised to reduce members’ entitlements unless allowed with the written consent of the trustee or the regulator (ATO).
The governing rules of an SMSF include certain covenants which cannot be modified or avoided. These covenants are in addition to the rules outlined by the trust deed. Here are few examples of some of the covenants that must be included:
- to act in the interests of the members
- to act in all matters affecting the SMSF
- to formulate an investment strategy
- to keep assets of the fund separate.
So, how frequently should SMSF trust deed be updated?
Since the trust deed specifies the rules of the SMSF, it is very important to make sure that any action you are going to take is permitted. This includes things like whether borrowing is permitted, whether or not necessary death benefit nominations are admitted, whether investments or investment strategies are allowed, etc. If as a member (trustee) you are planning certain activity with your super fund, and that activity isn’t included within the SMSF trust deed, then you will need to update your deed.
The other most often cause for a SMSF trust deed update is when there are changes in the legislation. For instance, when term allocated pensions were brought in several years ago, they were a new pension form. As such, anybody with a super fund who wanted to start a term allocated pension, needed to have the deed changed to allow this type of pension to be paid.
Usually, the SMSF trust deed should be checked at least every 5 years in order to make sure it is up to date. Many providers offer services for automatic update for a reasonable annual fee. You will receive a trust deed update whenever legislation changes so that you will always be informed. There isn’t specific age that would cause an automatic review of the SMSF trust deed. It is more about making sure that the rules allow the activity and strategy that you are planning to take.
Credit goes to > Superannuation Warehouse
