Why update my old SMSF Deed?
SMSF laws change. Old deeds are dangerous. They contain irrelevant clauses. You risk using an illegal power. An old SMSF makes it harder for your accountant, financial planner and auditor to look after your SMSF.
Replace your 'regimented' deed with a 'permissive' deed
SMSF deeds should be permissive, not regimented. Permissive deeds allow you to do whatever you like. This is subject to the superannuation and trust laws.
In contrast, regimented deeds try and 'help' the trustee. They mention all the legal restrictions into the SMSF deed. Often there is huge unnecessary detail. Often the regimented deed quotes huge slaps of the legislation in the SMSF trust deed. Sadly, every time the laws change, you need to update a regimented deed.
Permissive SMSF Deeds allow greater flexibility. They adapt to changes with minimal adjustment. The main difference is clear. Regimented SMSF deeds require almost constant monitoring, review and updating. This is to keep pace with changes to the legislation and case law. At Legal Consolidated, we draft permissive deeds. They need less updating.
15 Reasons to update your SMSF Deed for the 2017 Budget
Self-Managed Super Fund (SMSF) Deeds previously required updates in: SMSF update
- 1999 - ‘Excluded Funds’ became ‘Self-Managed Super Funds’, preservation & in-house assets SMSF update
- 2007 - ‘Simpler Super’
- 2017 - Law passed in 2016, requires the changes below
The 15 changes to SMSF Deeds required for the 2017 Budget are to:
1. Internally ‘rollback’ pensions to accumulation;
2. Segregate assets between accumulation and pension phases;
3. Reject contributions;
4. Refund contributions;
5. Deal with excess transfer balance tax and excess non-concessional contributions;
6. Allow income streams and Account Based Pension (grandfathered);
7. Specify guardians for incapacity and death requires SMSF update;
8. Identify the Power of Attorney when living overseas for more than 2 years;
9. Resettle pensions with flexible timing without mingling with accumulation account;
10. Allow reversionary beneficiary nominations;
11. Provide for CGT relief;
12. Deal with segregated and unsegregated assets;
13. Cease or keep Transition to Retirement Income Streams;
14. Calculate member balances, across different funds; and
15. Calculate internal pension rollbacks to accumulation.
The SMSF update is required to give maximum flexibility to your accountant and adviser.
Why does my Accountant want the SMSF update?
Pre-2012 SMSF Deeds fail to deal with 10 issues:
- clauses requiring the Trustee to do something that is no longer legal or beneficial
- 'regimented' with unnecessary rules v's 'permissive' that are silent as to what must be done. This allows the SIS Legislation to automatically apply
- increased concessional contribution cap
- insurance cover - removing from trust deed out of date conditions
- losing pension at death or if the minimum payment not made
- excess concessional contributions taxed at member's marginal rate (-15% offset)
- Investment Strategy after the ATO's new Audit approach
- report assets at market value and leaving the mechanism for the Accountant
- allowing remuneration for non-trustee duties
- allowing for non-lapsing Death Benefit Nominations
There is no risk of resettlement
Resettlement of an SMSF occurs when a new 'trust estate' is created out of an old trust. When this occurs, the trustee is considered to have disposed of the assets in the old trust. Accordingly, a new trust is created. This results in significant negative tax implications.
However, there is no risk of resettlement under the High Court authority of Commercial Nominees (2010). Our letter of advice, expressly states there is no resettlement. This is for your Financial Adviser and Accountants due diligence files.
Updating your SMSF Deed through Legal Consolidated does not result in the resettlement of your SMSF. We retain those parts of the old Deed required to not affect a resettlement. This is based on both the legislation and previous court decisions. Start building now.
Telephone us anytime for help on how to answer the questions. We are lawyers.