Review deeds, but change only when needed

SMSF deeds review

SMSF practitioners should be reviewing the deeds of their trustee clients while reminding them ongoing regulatory change does not always require an amendment to the document.

SMSF trust deeds should be undergo a review every three to five years, but trustees and their advisers do not need to make amendments each time current legislation is changed or new rules are introduced, according to a technical expert.

Smarter SMSF chief executive Aaron Dunn said it was not uncommon for SMSF trustees to assume that because a law has changed that there is an automatic requirement to update the deed of their fund.

Addressing SMSF practitioners during a recent webinar, Dunn said they can assist trustee clients by examining the impact of legislative and regulatory change on a fund trust deed, but even where those changes are applicable, they do not have to be carried out.

“Look for prescriptive references in the deed that may be impacted by law changes, such as the proposed change to the ages from 65 to 60 for downsizer contributions,” he said.

“What does the deed say in respect to being able to accept a contribution under downsizer if a trustee or member is 62 years of age? Is it a prescribed condition or does it allow for contributions to be accepted?

“A trustee also may not have any need to use the opportunity that arises from the legislative change, such as a downsizer contribution. They could make it, but if they don’t want to sell their home, they don’t need to change for the sake of change.”

He said while these individual changes need to be assessed against the trust deed, it still remained important that SMSF practitioners and trustees engaged in a regular review of their deeds, and suggested a three-to-five-year time frame for those reviews.

“This review means keeping the deed up to date with strategic and investment opportunities, and to best manage any risks found within the fund,” he said.

“You should be looking at the deed and if changes are needed, pull the trigger, but if nothing is required, lock it away until the next review.

“Do this on a regular basis with your clients and have some review process in your practice that ticks everything off for clients and makes the specific changes needed.

“Ensure that you are familiar with the powers of the trustees under the deeds being used with your SMSF clients.

“Uniformity of deeds helps in this regard because you know that what is happening with one will likely be happening with others.”

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