The importance of reviewing your SMSF Deed

Most SMSF trustees and members are aware that the actions of the trustees of the SMSF must be in line with the rules and regulations of the Superannuation Industry (Supervision) Act 1993 otherwise known as the SIS Act.

However, many trustees assume that if an investment strategy is permitted by the SIS Act then they can implement that strategy in their SMSF. This is not necessarily the case. The trustees need to check their trust deed to ensure that the trust deed also permits the transaction. It is my experience that in many cases the deed does not permit the action.

For example, the SIS Act allows for non recourse borrowing arrangements for the SMSF to borrow to acquire a property. This amendment to the SIS Act occurred in 2008. Self Managed Superannuation Funds that were established prior to 2008 do not permit any sort of borrowing, not even that non recourse borrowing arrangement that the SIS Act allows.

Another common example is where a member is over age 55 and wants to commence a transition to retirement strategy. That is, take an income stream from his members balance in the superannuation fund whilst still working. Again the SIS Act permits this strategy but many superannuation deeds only permit the payment of a benefit when the member reaches retirement age and retires. In this case, as the name of this strategy suggests the member has not yet retired.

If the Act and the deed are not satisfied then the fund may be deemed to be non compliant. The implication for a non compliant fund is the assets are taxed at 45% (not the income, the assets).

Should you require any assistance with amending your SMSF Deeds please contact Peter Quinn by submitting an online enquiry or calling us on +61 2 9580 9166 to book an obligation free appointment.

The information in this document does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. It is important that your personal circumstances are taken into account before making any financial decision and it is recommended that you seek assistance from your financial adviser.