Outdated legal terminology in employer super-related trust deeds could potentially hinder an SMSFs ability to wind up the fund in its later phases, according to a technical expert.
Speaking today at the SMSF Association National Conference 2022 in Adelaide, SuperConcepts SMSF technical and private wealth executive manager Graeme Colley said it is not uncommon to see trust deeds with older terminology.
Colley attributed the issue to trustees not amending a fund’s deed to better suit the Superannuation Industry (Supervision) (SIS) Act 1993 and encouraged financial advisers to ensure their clients have done so.
“How many of you come across those older trust deeds that have been in place [since] maybe 1993 when the SIS legislation originally came in? No surprises that [trustees] never amended the trust deed to meet the SIS requirements anyway,” he said.
“How many times have you seen old trust deeds that are still in use and they use words like ‘employee sponsored’ as part of the definition because often the superannuation fund cannot do anything without the permission of the employer sponsor?”
He additionally noted ‘associated employer’ is another reference commonly used in trust deeds, which has complicated the winding-up process for superannuation funds as the employer sponsor must provide permission for the fund to be wound up.
This has occurred in circumstances where the employer sponsor or associated employer was wound up years ago and clients have retired and “faintly remember the name of the company” despite being sponsors, he said.
“It’s sad to see that we have a few trustees that haven’t been updated with their accountant,” he said.
“Get [the trust deed] and go through it with the trustee to see whether they can be caught by misunderstanding the employer arrangement.”