Email Headline: Upgrade your SMSF Deed for new Strategies, Laws and Bloodline Protection Option
The Commissioner of Taxation requires all SMSF Trustees to ensure that their existing deed and governing rules of their SMSF be current and suitable for all members. Failure to have a current and updated deed may result in:
- Potential fines of up to $13,320.
- The Trustee and Members of the Fund not being able to implement important new superannuation changes thereby providing compliance issues.
- The Trustee and Members not being able to use up to date strategies to maximise the benefits in the SMSF whilst reducing taxation.
- The fund auditor finding transactions and actions taken by the Trustee that do not accord or comply with changes to the superannuation and taxation laws over the past two years.
Generally, it is best practice to upgrade your deed when new rules are introduced and at least every two to three years. Some of the recent changes to the laws required to be reflected in the deed for your SMSF are:
- Increasing the number of members, a SMSF may have from four to six enabling a SMSF to become a true family super fund.
- Enabling younger members to hold their superannuation benefits is a separate investment account to other members of the fund.
- Limiting the payment of superannuation benefits on the death of a member to the deceased member’s lineage or bloodline.
- Ensuring the fund does not breach the pension limit rules and, the pension payment rules.
- Enabling the Trustee of the Fund to accept a broader category of contributions for fund members, particularly retired fund members.
- Implementing a SMSF Living Will which provides directions to your Trustee of what is to happen in the event you are incapacitated with a sickness, quarantined, or have dementia. This is crucial to put in place so that your enduring power of attorney becomes your replacement trustee, able to implement and execute your wishes in a binding manner.
- Implementing a SMSF Will which provides directions to your Trustee on what is to happen in the event of your death. This is crucial to put in place, so your Executor becomes your replacement trustee and able to implement and execute your wishes in a binding manner.
- Implementing a SMSF Death Benefits Trust, which is a special purpose testamentary trust created by the Trustee of the Fund for adult children and grandchildren who are bloodline. This trust does not form part of the estate so it cannot be challenged in any contested estate by a person who feels as though they have not been provided enough in the testator’s will.
Because of the above, and in particular, the Commissioner’s requirements, compliance and audit issues as well as ensuring your SMSF is as strategic, efficient and less likely to hit an expensive roadblock, we strongly advise that you upgrade the current deed and governing rules for your fund. The cost for the upgrade is $350. If you would like to discuss our special purpose SMSF deed which is focused on bloodline membership, benefits and control please contact us.
Special Purpose SMSF Corporate Trustee is a Must
For those SMSFs that do not have a special purpose company acting as a trustee it means that in the event of death of incapacity of a member, the registered name on the assets of the fund (as required by the Commissioner of Taxation) will need to change, further the trustee of the fund may not be able to pay out any lump sums or disability pensions, just “old age” pensions under the superannuation laws. We recommend the Abbott & Mourly special purpose corporate trustee as it has some important estate planning features enabling the SMSF Will, SMSF Living Will and SMSF death benefits trust strategies discussed above. If you do not have a company trustee it is a simple process of changing the trustee and notifying the Commissioner, which will enable lump sums to be paid from the fund.
Let us know by return email or you can contact us directly to proceed with the important upgrades. If you don’t want to upgrade the deed please let us know as we must send out an indemnity letter for you as trustee of the fund as part of the SMSF audit process so we are not professionally liable for any action against the trustee using an non-current trust deed.