01/05/2012

Basically because the Tax Office and the superannuation law says so, that's why.

The Commissioner of Taxation has commented that "trustees may need to take care to ensure the fund's trust deed is up to date in the event that members wish to take advantage of…new options…".

The Commissioner has also stated that "we will take a firm approach with trustees who fail to make a genuine effort to comply".

It is the Trustee's obligation to ensure that the Trust Deed for their SMSF is regularly updated.  The Trust Deed must contain the necessary powers for day to day administration of the Fund. 

By conducting regular reviews or subscribing to an automatic deed updating service you can rest easy knowing that not only is the daily management authorised, but in the event of the unexpected your Trust Deed doesn’t leave the members high and dry.

For instance, we have seen many trust deeds which have not been amended and were established prior to 1 July 2007.   Simplified Superannuation legislation made significant changes, most of which became effective from 1 July 2007.  The sad part is that it isn't as easy as just scanning the deed for references to RBL’s to check whether it meets the needs of the Trustees and Members.

As well, the Cooper Review is likely to result in further amendments in the near future, and once again this may impact the Trust Deed of the fund.  With further amendments likely it is a pertinent time to conduct your review or consider subscribing to an updating service. 

Remember that if the superannuation law has changes but your trust deed does not, then the trustee and members may be unable to make use of the changes because their trust deed does not empower them appropriately.

Section 55(1) of the SIS Act provides that a person must not contravene a covenant contained, or taken to be contained, in the governing rules of the fund.  It further provides that any loss as a result of this conduct can be recovered from the Trustee, Adviser, Accountant, Auditor etc if they were the party whose conduct resulted in the contravention. 

This loss can be recovered by any person suffering the loss or damage as a result of the contravention and they have six years from that date to make a claim.  This leaves not only the Trustee in a precarious situation if they have not conducted regular reviews of the Trust Deed but potentially their Advisers or any other person providing assistance to the Trustees.

If you have any questions in relation to this article, please contact TOWNSENDS BUSINESS & CORPORATE LAWYERS on (02) 8296 6222.