Creating and changing SMSF trust deeds

Self-managed super funds have attracted many employees who feel that they have obtained skills and experience to manage their own pension and want to increase their benefits once they retire. These funds are easy to set up and offer numerous benefits in terms of taxation and financial flexibility. Because it is a legal entity, some conditions need to be met in order to establish a super fund. A normal super fund includes more than two members and one trustee who can either be appointed by a third-party consulting agency or by the members. Yet, this type of fund is not considered official until a document is signed – a self-managed super fund trust deed or shortly a SMSF deed.

What is an SMSF trust deed?

The superannuation trust deed states how the members should act and operate in a super fund and what are their financial and legal responsibilities. People get confused about this part, because normally they think state laws cover everything incorporated withing the functions of a fund. Yet, most responsibilities of fund members are actually defined with SMSF trust deeds rather than state laws. Moreover, thinking that you can do something in a SMSF fund just because the law approves it, is very wrong and penalties will follow for your actions. That’s how important this document is.

Changing a SMSF deed

Because of its importance, a trust deed of a fund is not easy to change and requires more than simple documentation tasks. Changing the whole deed with a new one is not right, because it actually means that you are setting up a new fund. It is preferable that in these situations you ask for a professional advice because you don’t want to trigger the disposal clause for all assets. As an opposite alternative to changing the SMSF trust deed is creating a deed of variation that to some extent replaces terms from an existing trust deed, but cannot replace the whole document and its statements.

In general, trust deeds need periodic updates to keep up with new investment strategies and legal requirements. The right way to update a trust deed of a fund is to use professional legal advice or service. Lawyers who have experience in this field hold much of the information needed to create a SMSF trust deed that incorporates proper rules of a successful fund. You should be aware that an update needs to address members’ interests to be accepted officially. That is why any decision making processes should be entrusted on one table with all members present.