Off-the-shelf self-managed superannuation fund (SMSF) Trust Deeds are a dime a dozen in this internet age. The DIY mindset and ready availability of template SMSF Deeds is likely partly responsible for the idea that drafting a SMSF Trust Deed is a quick and easy task to be done by the members upon SMSF establishment, or at least, without the need for obtaining legal advice in the first instance. However, saving on costs from the outset can often impact SMSF compliance and lead to significant future costs both to the Members at the time that issues present themselves, and in retirement.
SMSFs are regulated by the Australian Taxation Office (ATO), and are governed by the Superannuation Industry (Supervision) Act 1993 (Cth) (SISA). The SISA and associated regulations set out the legislative framework for SMSF Compliance, which is then monitored and enforced by the ATO.
Personalisation of SMSF Trust Deeds
The unique individual composition of a SMSF’s Members is not reflected in the DIY products ready for purchase. SMSF Trust Deeds should address the specific characteristics of each SMSF and consider at least the following important factors:
Age of the Members of the SMSF,
Work status of the SMSF Members,
Relationship of the Members,
Investment and risk Considerations of the Members,
Mechanism for removal of Members,
Basis for voting and decision-making.
The above factors highlight just some of the important considerations when establishing, and then later running, a SMSF. Therefore, it is crucial that the SMSF Trust Deed explicitly covers these important elements and is personally tailored to meet the needs of the Members so that they can run their SMSF efficiently whilst maintaining absolute compliance.
Some Common Problems
Off the shelf SMSF Trust Deeds often contain broad catch-all types of provisions that provide the Trustees with the widest range of powers. This also means that if the SMSF Trust Deed is drafted in an open-ended manner, the Trustees have wide-ranging powers – which is fine when everything is running smoothly. However, when a dispute arises, tailored drafting is key to assisting Members in resolving the dispute and to ensure continued compliance. SMSFs should be set up with Deeds that set out a clear, planned intention for the running of the SMSF and the investment of the monies. Notably, as situations and preferences change, Members can amend their SMSF Trust Deeds to reflect this.
Where a SMSF Trust Deed has been drafted by someone other than a legal professional, and the SMSF is found to be non-compliant or the Deed defective in a key respect, the SMSF Members may find that their retirement savings are lost to penalties, taxation and/or additional compliance requirements. Therefore, initial drafting of the SMSF Deed is crucial in ensuring ongoing compliance, noting that Members should engage professional legal advisors to undertake regular reviews of their SMSF Trust Deeds throughout the lifecycle of the fund.
Our team has a wealth of experience dealing with SMSFs, both in the private sector and in audit and regulatory roles. Get in touch today if you are contemplating setting up a new SMSF, or you think it is time to review your current SMSF Trust Deed.
This article is not legal advice and the views and comments are of a general nature only. This article is not to be relied upon in substitution for detailed legal advice.