Why regularly review your Trust Deed

The Superannuation Legislation is constantly changing. Advisors are expected to keep abreast of the Superannuation Insurance (Supervision) Act 1993 ("SIS"), the Income Tax Assessment Act, the Bankruptcy Act 1966, the Family Law Act l975, Superannuation Contributions Tax Imposition Act 1997 and the Corporations Act 2001.

As the laws constantly change so do the requirements of the Governing Rules (The Trust Deed) of Superannuation Funds. The regular review of the most important document of a Self Managed Superannuation Fund is part of the every day maintenance of the Fund.

The provisions of the trust deed, in most circumstances, override the law including a provision like:

"...if the law changes it is automatically included in this deed...". ("The Automatic Clause")

This Clause is meaningless.

A recent example to the law changing is the amendment to the contribution rules in Part 7.04 of the SIS Regulations. This would not be included in the Automatic Clause" because the contributions in this instance are voluntary. The Deed we provide is written broadly allowing any contributions provided the fund does not become a non-complying SMSF so we can instantly cater for new changes.

We suggest regular review of the Trust Deed is essential to prudent management of the Fund.

Why Upgrade to the GLENISTER & CO Trust Deed?

Compliance with Current Legislation.

The superannuation laws, like all laws are complex and constantly changing. This makes it virtually impossible for trustees of their own SMSF to have peace of mind that the activities they undertake in their fund are in accordance with those laws.

The governing laws of a SMSF are contained within the trust deed or rules of the fund and the deed or rules must adequately reflect these laws and also allow the many strategies available to members of these funds.

The GLENISTER & CO trust deed is regularly updated to cater for changes to the super laws so that SMSF members do not miss out on any strategic opportunities. Changes over the past few years have allowed strategies such as:

•  Investment-return smoothing;

•  adding non-working members (eg. spouse, children, etc);

•  ability to make spouse contributions;

•  ability to make contributions up to age 75;

•  ability to make contributions on your children's behalf;

•  ability to accept government contributions;

•  binding beneficiary nominations;

•  introduction of growth pensions; and

•  pensions flexibility in retirement to complement your lifestyle.

Comprehensive PDS.

The most important change that has occurred in the last year or so is the product disclosure requirements for a SMSF. The rules apply to financial products in general however in relation to a SMSF the responsibility to issue a product disclosure statement (PDS) primarily rests with the trustee. Although the trustee is to prepare the PDS, any person providing SMSF advice caught by the Corporations Act 2001 is also required to provide a PDS prior to advice being given in respect of a SMSF.

GLENISTER & CO's PDS Solution is provided in three components so as to provide a greater level of disclosure:

•  A general information memorandum at the front of the trust deed and rules;

•  Plain English explanations for most rules inside the trust deed; and

Given that the trust deed governs the strategies an Adviser can implement on their client's behalf, it is important that you and the trustee are able to understand the provisions of the deed. The trust deed is practical and strategic yet easy to read. Whilst its primary function is to govern the activities of the fund in accordance with the relevant laws, it also acts as an educational tool for the trustees of the fund empowering them with greater knowledge of the operation of their fund.

Tax Deductible Expense for the Fund.

As a general rule, costs incurred by a trustee of a superannuation fund in amending the fund's trust deed are not a deductible expense. However, if the trust deed amendments are necessitated by changes in Government regulations the costs incurred are a deductible expense for the fund (ATO Tax Ruling 2672).

Upgrading a trust deed to satisfy the trustee's PDS obligations under the Corporations Act 2001 or any of the other recent legislative changes will be a deductible expense for the fund.

One Deed Reduces Compliance Risk.

The superannuation laws require the trustee, and adviser, the auditor and any other person advising the trustee on a transaction of the fund to ensure that the transaction undertaken by the trustee complies with the rules. By upgrading all the trust deeds across the firm we are reducing the compliance risk with respect to all SMSFs under our management.

The GLENISTER & CO Upgrade Solution.

It is a common occurrence for trust deeds to be upgraded. It can be simple, painless and effective if done right. However replacing a trust deed is not a matter of throwing the current deed out the window and ordering a new deed. This is simple but dangerous, as it would result in the resettlement of the existing fund. As a result, all assets of the previous fund are deemed to be disposed of thereby realizing capital gains, stamp duty plus requiring double reporting for that year.

The amendment clauses in the old deed are reviewed to ensure the deed can be amended or replaced and whether there any specific requirements in the process. Appropriate documentation to give effect to the amendment is prepared which includes trustee meeting minutes and a deed of variation. Then the new deed takes effect and the old deed becomes superseded. Moreover it is done in a way that ensures that there is no CGT payable.

Professionally Packaged and Delivered.

Your new super fund deed is packaged in its own folder with two bound copies of the super fund trust deed and the amending documentation. Also included is a copy of the Commissioner of Taxation's book “Its your money…but not yet” to further assist in your education as trustee of your own SMSF.