Why Should I Update My SMSF Deed? Is It Really Necessary?

By Jaye Mankelow

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If your accountant has recommended updating your Self-Managed Superannuation Fund (SMSF) deed, you might be wondering, “Why should I do this? It was set up 10 years ago, and everything seems fine.” While it might feel unnecessary, regularly reviewing and updating your SMSF deed is essential for keeping your fund compliant, maximising opportunities, and ensuring it aligns with current laws and your financial goals.

Here’s why updating your SMSF deed is more than just a box-ticking exercise and why it’s crucial to keep it up to date.

What Is an SMSF Deed?

An SMSF deed is the legal document that sets out the rules for how your SMSF operates. It governs:

• The powers and responsibilities of the trustees.
• How contributions, investments, and benefits are managed.
• The distribution of superannuation benefits upon a member’s death.

Your SMSF deed is the foundation of your fund and must comply with the Superannuation Industry (Supervision) Act 1993 (SIS Act) and other relevant laws. If it doesn’t, your SMSF may face compliance risks and penalties.

Why Update Your SMSF Deed?

Legislative Changes

Superannuation laws change regularly, and your deed must reflect these updates to ensure compliance. For example:

• Recent Changes: Introduction of transfer balance caps, downsizer contributions, and changes to minimum pension rules.
• Historical Changes: Changes to contribution limits, borrowing rules (LRBAs), and eligibility criteria for certain strategies.

A deed that doesn’t incorporate these updates may prevent you from taking advantage of valuable strategies or could even breach compliance requirements.

Flexibility for Strategic Opportunities

An outdated deed may limit the strategies you can implement. Modern deeds often include provisions for:

• Binding Death Benefit Nominations (BDBNs): Ensuring your benefits are paid according to your wishes.
• Limited Recourse Borrowing Arrangements (LRBAs): Enabling the fund to borrow to purchase property.
• Contribution Types: Allowing for non-concessional, concessional, and downsizer contributions.
• Reversionary Pensions: Ensuring income streams pass seamlessly to beneficiaries.

Updating your deed allows you to leverage opportunities that weren’t available when your SMSF was established.

Compliance Risks

If your deed is not aligned with current laws, your SMSF may inadvertently breach its obligations. This could result in:

• Financial Penalties: Non-compliance penalties from the ATO.
• Loss of Tax Concessions: SMSFs lose their concessional tax treatment if deemed non-compliant.
• Trustee Liability: Trustees can be held personally liable for breaches.

Regular updates reduce the risk of non-compliance and protect your fund.

Alignment with Your Changing Circumstances

Your financial and personal circumstances can change significantly over time. Your SMSF deed needs to adapt to reflect:

• New Members: Adding children or other family members as trustees.
• Retirement Planning: Transitioning from accumulation to pension phase.
• Estate Planning: Ensuring your deed supports your wishes for distributing superannuation benefits.

A deed that no longer reflects your goals or situation may create unnecessary complications.

How We Can Help

We understand the importance of keeping your SMSF deed up to date. To ensure your fund remains compliant and ready to take advantage of new opportunities, we typically offer to update your deed every few years or whenever there are significant changes in the SMSF landscape or legislation.

To do this effectively and efficiently, we often update deeds across all funds simultaneously. This streamlined approach ensures consistency and reduces the administrative burden for trustees. Our team works closely with you to ensure the deed reflects current laws, incorporates modern strategies, and aligns with your unique financial and estate planning goals.

Regularly updating your SMSF deed is not just about compliance—it’s about ensuring your fund remains flexible, aligned with your goals, and ready to take advantage of opportunities. With superannuation laws constantly evolving and personal circumstances changing, a proactive approach to reviewing your deed can save time, money, and unnecessary complications.

If your accountant has recommended updating your SMSF deed, it’s likely for good reason.

Contact your trusted advisers to discuss your current deed and explore how it can be brought up to date. Let us guide you through the process to ensure your SMSF remains a valuable tool in achieving your financial goals.

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