Updating your SMSF trust deed doesn’t mean replacing an existing trust deed with a new one.
The reason you won’t want to sign a new trust deed is that you would be creating a new SMSF which could result in the ‘disposal’ of the fund’s assets, triggering capital gains tax and stamp duty costs on property.
You do, however, want to have a Deed of Variation prepared to rewrite any affected terms in the trust deed to adequately reflect current superannuation rules. A Deed of Variation will effectively update an existing trust deed without replacing it, thus sparing you any expenses likely incurred by creating a new SMSF.
What changes require an update to your SMSF trust deed?
The purpose of a trust deed is to provide the governance for the operation of a self-managed superannuation fund.
If not kept up-to-date the risks to your SMSF include invalid powers resulting in ATO audits or loss of ATO exceptions; loss of tax benefits; and even wrongful distribution of death benefits due to invalid documentation or out-dated powers to Trustees.
Over time the Australian government makes changes to the superannuation rules and it’s important that your SMSF trust deed reflects new rules to help you avoid taxation pitfalls.
In the last 20 years, significant changes have occurred, including:
- Recognition of same-sex couples for super benefits
- Introduction of account-based pensions
- Introduction of transition-to-retirement pensions and removal of tax exemption on pension earnings (since 2017)
- Introduction of $1.6 million transfer balance cap
- Splitting super contributions with your spouse
- Super contributions allowed until age 75
- Removal of work test for super contributions made under age 65
- Tax-free super for over 60s
- Dividing super in event of divorce
- Introduction of interdependent relationships for death benefits
How best to update your SMSF trust deed.
It’s best to review your SMSF trust deed annually. It’s best to update it whenever there are changes to the super rules or changes in your own personal circumstances, including deciding to take a pension, planning high risk investments or changes to death benefit beneficiaries.
Remember to consider timely updates to ensure the governing of your SMSF is in accordance with your needs.
How can YML help?
Over the coming weeks, our YML Super Solutions Team will be contacting Trustees to discuss and initiate the update process of your SMSF trust deed/s.
We can prepare a Deed of Variation for you for $500 (minimum) + GST.
If you want to contact us, please call our YML Super Solutions Team on (02) 8383 4400 or by visiting the Contact Us page on our website.