Updating your SMSF trust deed

Self-managed superannuation funds (SMSF) are governed by the rules set out in the trust deed, therefore, trustees need to ensure any actions do not breach the rules in the deed.

As the trust deed is a legal document providing the governing rules for establishing and operating your SMSF, it needs to be reviewed and updated to reflect changes to superannuation legislation. The trust deed covers provisions such as whether binding death nominations are allowed, whether certain investment strategies are permitted, whether the fund can pay a pension income stream etc.

Out-of-date provisions may result in significant adverse effects on members’ benefits, estate planning and breaches may result in potential administrative fines.

For example, non-lapsing binding death nominations are not covered in older trust deeds, meaning that some SMSF members may have unintentionally created three-year lapsing nominations.

As a binding death nomination must be updated every three years according to superannuation law, the implication of this is that members may either have an invalid nomination, or may die without a nomination. This means a deceased member’s wishes will be ignored due to a technicality.

Generally, your trust deed should be updated after legislative changes to superannuation, if the deed has not been amended within the past five years or when a member wishes to undertake a course of action that may not be authorised by the deed.