Compliance, Documentation

Trust deeds are extension of the law

SMSF trust deeds

SMSF trust deeds must be seen by trustees and their advisers as an extension of superannuation law and adhered to at all times.

Advisers and their SMSF clients must recognise the critical nature of their funds’ trust deeds by acknowledging it is effectively an extension of the Superannuation Industry (Supervision) (SIS) Act, a strategy specialist has said.

This in turn means advisers must ensure their SMSF trustee clients have trust deeds in place that are up-to-date and allow the implementation of the current strategies allowable by law, such as account-based pensions and limited recourse borrowing arrangements, Lightyear Docs founder Grant Abbott said during a ChangeGPS Deed Awareness Week seminar held today.

Abbott noted, for example, if a trustee sets up an account-based pension and the deed only allows for an allocated pension to operate inside the SMSF, they will have broken the law.

According to Abbott, a situation like this could lead to catastrophic consequences for advisers and their clients if the deed is ignored deliberately and non-permissible strategies or retirement income instruments are enacted.

“If you [operate outside the trust deed] wilfully and make a profit [from] it, then you [will have] also breached section 202 [of the SIS Act], which also means you [will have] potentially breached the Commonwealth Crimes Act and there’s no PI [professional indemnity] cover for that,” he warned.

“That’s why you need a really good solid deed.”

During the same session, Seamless SMSF head of technical and training Frank La Spada pointed out the acknowledgement of key legislative dates can help trustees and advisers to avoid falling foul of the rules.

“Generally if the deed is dated before 1 July 2007 – we know that’s when account-based pensions were [allowed] and that legislation changed – [it won’t permit the use of these income streams],” La Spada noted.

“[So] you want to make sure that if your deed is dated before then, it allows for those [account-based pension] provisions. Most likely it won’t.”

Copyright © SMS Magazine 2024

ABN 43 564 725 109

Benchmark Media

Site design Red Cloud Digital