With the start date for the 2016 budget changes to superannuation approaching, it is time to consider whether current SMSF trust deeds will be appropriate under the new regime.
Why consider an update to a SMSF trust deed now?
Some SMSF trust deeds will still be adequate, but there are a significant number that contain provisions inconsistent with the new rules, or do not have appropriate terms.
Many SMSF trust deeds were amended in 2007 and have not been touched since. In addition to the new rules, there are reasons to update now, including recent innovations in SMSF trust deed drafting, cases on binding nominations and conflicts of interest as well as substantial guidance from the ATO on a range of superannuation issues. These would be advantageous to have in your SMSF trust deed.
What should I look for in a SMSF trust deed?
When contemplating an SMSF trust deed update, consider the following:
- Does the deed automatically remove the limitations imposed in a transition to retirement income stream when the pensioner satisfies a full cashing condition?
- Can the terms of a pension change without needing to formally stop and restart the pension, including the ability to add, remove or alter the reversionary beneficiary?
- Are there sufficient options in the death benefit payment provisions? Can the trustee pay child pensions or to a superannuation proceeds trust?
- Are the binding death benefit nomination and reversionary pension provisions simple to use? Are there unnecessary procedural requirements or restrictions that may render binding nominations ineffective?
- Are there other death benefit control mechanisms, such as a death benefit guardian?
- Is the trust deed clear about priority of death benefit lock in provisions and that future variations cannot change binding death benefit arrangements inadvertently?
- Can the trustee comply with the new forms of commutation authorities and paying excess transfer balance tax, even without the consent of the member?
- Does the trust deed allow for reserving of contributions and income?
- Is it clear what attorneys can and cannot do on behalf of a member and are the powers appropriate?
- Can the trustee segregate investments even for members not in pension phase?
- Are there mechanisms to resolve disputes between members so they can exit the fund without consent of the others?
As with everything with SMSFs, it is important to ensure the trust deed will allow you to do the things you want and need to do.