SMSF Trust Deed update July 2008 Is it time to update your SMSF

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					SMSF Trust Deed update                                                                                         July 2008

Is it time to update your SMSF trust deed?                      Nomination for your death benefits
If your SMSF trust deed has not been updated
                                                                A major reason to update your SMSF trust deed
since the introduction of the Superannuation
                                                                is to better manage your benefits when you die
Industry (Supervision) Act in 1994 (SIS) or as
                                                                (death benefits). When you die, the trustee of
a result of the 3 major changes to those laws
                                                                your fund must pay your death benefits to either
in 1999, 2001 and 2007 and the 2007 changes
                                                                your estate or a dependant (as defined under
to taxation of superannuation funds, the time
                                                                SIS). Unless you make specific arrangements
may now have come.
                                                                about how to deal with your death benefits,
                                                                there is no assurance that your trustee will pay
Why use our modern non prescriptive trust
                                                                them in the way you want.
One of the first reasons to consider having                     As trustees of an SMSF can be subject to
your trust deed updated is that it may be very                  direction about what happens with your death
prescriptive, inflexible and complex. If so, it                 benefits, if the trust deed is properly set up, you
will typically mirror a lot of what is in SIS and               can create a non lapsing nomination about who
when SIS changes, the deed is often out of                      is to get your death benefits. This can be done
date.                                                           under your will or in writing and does not have
                                                                to be in a prescribed form or renewed every 3
Our trust deed, which is not prescriptive, is                   years in the way required by many trust deeds.
very flexible and written in a way that is easy                 If you would like a copy of our newsletters on
to read. It has generally stood the test of time                this issue, please go to:
since the introduction of SIS in 1994, including
to permit most of the strategies that have been       
developed in managing a member’s benefits
without the need for it to be amended.                          Please note that you don’t have to have a death
                                                                benefit nomination, but if you want to be sure
Updating your deed with us will mean that you                   about what happens to your death benefits
have a modern, flexible and easy to read                        when you die, a nomination is required. If the
document that should cope with                                  nomination is to be effective, the trust deed
superannuation strategies as they develop.                      must provide for it.

                                                                Guardian to protect your death benefits
Read on to learn more about other features of
our trust deed.                                                 If you don’t know what you want to do with your
                                                                death benefits when you die, but would like to
Outdated trust deed provisions
                                                                set up a safety net to ensure that before they
Some old trust deeds contain outdated                           are paid from the fund the trustee must seek the
provisions that relate to a specific employer,                  approval of a person you nominate, our trust
including things that the trustee must first                    deed provides for that by allowing you to
defer to the employer. These sorts of deeds                     nominate a guardian who has this role.
are inappropriate and should be updated.

                     T 02 8915 4900 | F 02 9290 2998 | E | W
                        Level 2 36 Carrington Street Sydney NSW 2000 | DX 10111 Sydney Stock Exchange
                         Liability limited by a Scheme approved under the Professional Standards Legislation
SMSF Trust Deed update continued                                                                                                     July 2008

Payment of your benefits                                                      Contribution splitting
Not all trust deeds permit for the payment of a
                                                                              While spousal contribution splitting may be
lump sum, a pension or a mixture of both.
                                                                              permitted by law, it is important that the trust
Neither do all trust deeds permit for a
                                                                              deed is properly set up to facilitate it.
reversionary pension to be paid when you die.
Our deed does both of these things.                                           Reserve accounts
Sometimes, due to the definitions used in them,
trust deeds do not permit for a transition to                                 If reserve account strategies are to be pursued,
retirement pension to be paid. The flexible form                              the trust deed must first permit for reserve
of our trust deed enables all forms of pension                                accounts to be maintained and for the allocation
allowable by law to be paid without restriction.                              of amounts to and from them.

Human trustee succession                                                      Instalment warrant borrowing

Death of a human trustee can sometimes                                        If an instalment warrant arrangement is to be
require further action to be taken to replace a                               entered, the trustee must have the power to
deceased trustee with their legal personal                                    borrow in accordance with the laws that permit
representative during the administration of the                               them.
estate of the deceased trustee member. Our
trust deed ensures that happens automatically.                                Anti-detriment payment tax concession

When are contributions made?                                                  It is important that the fund’s trust deed permits
                                                                              the trustee to top up a death benefit payment by
A clause that permits the trustee discretion to                               an amount for tax paid on taxable contributions.
decide when a contribution has been made can                                  If it does, the fund can take advantage of a
avoid problems that arise from situations where                               taxation law designed to ensure that death
payments are made to the fund bank account                                    benefits are not impacted by the tax payable on
but there is difficulty in determining whether or                             taxable contributions.
not it is a contribution or not and locked up in
the fund.                                                                     Please contact us for more information about
                                                                              our arrangements for updating superannuation
Deemed compliance with the law                                                fund trust deeds, including for a bulk discount.

A wide and flexible deeming clause that permits                               Author Damian Scroope
provisions of the superannuation law to override
the terms and conditions of the trust deed is                                 If you would like to receive future copies of Insight
very important. However, the clause must also                                 electronically please visit our homepage and click
                                                                              subscribe in the top right hand corner.
permit the trustee to manage the fund in
accordance with those laws despite what is in
the deed.

                              T 02 8915 4900 | F 02 9290 2998 | E | W
                                 Level 2 36 Carrington Street Sydney NSW 2000 | DX 10111 Sydney Stock Exchange
                                  Liability limited by a Scheme approved under the Professional Standards Legislation
                         Disclaimer The information in this newsletter is general in nature and is not intended as legal advice.
                                       You should not do or fail to do anything in reliance on information in it.
                                      We do not accept any responsibility for any loss that you suffer if you do.

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