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Trust Deed Upgrade

From 1 July 2017 there are significant changes to improve the sustainability, flexibility and integrity of Australia’s superannuation system. These reforms will impact most superannuation members, in particular those who operate a self-managed super funds (SMSF).  These measures are wide ranging and will:

  • Reform the taxation of concessional contributions
  • Improve access to concessional contributions
  • Lower the non-concessional contribution cap and introduce eligibility criteria;
  • Improve super tax concessions for low income earners;
  • Introduce a new transfer balance cap to limit the available tax concessions in retirement phase;
  • Improve the integrity of Transition to Retirement Income Streams (TRIS)
  • Prohibit SMSFs where a member has a balance in excess of $1.6m from segregating fund assets for tax purposes; and
  • Remove the anti-detriment provisions

As a result of these ‘once-in-a-decade’ reforms, your existing trust deed will need to be updated to accommodate these new measures. Just like servicing your car regularly to ensure that it runs at an optimal level, updating the rules of your SMSF will ensure that you can continue to leverage the strategies available within your super fund.  

Why this trust deed?
In addition to accommodating the superannuation changes from 1 July 2017, the trust deed that we are recommending that your fund upgrade to includes some important strategic and estate planning features including:

  • Flexibility in making contributions– the rules of the fund have been updated to ensure all forms of authorised contributions can be accepted.  The deed also provides an opportunity for contributions to be held by the trustee for a short period of time and allocated at a later date.  This can provide both tax benefits to an individual through contribution reserving but also potentially benefits making additional contributions due to the value of a member’s total superannuation balance at the end of a financial year.
  • Flexibility in payment of income streams - the trust deed allows for the payment of various income streams from within the SMSF by establishing the pension as a special rule of the fund.  This is important, as over time the member may want to alter the terms and conditions of the income stream, such as adding or removing a reversionary beneficiary.  This may occur without any loss of existing entitlements, including Age Pension.
  • Creation of a ‘paramount document’ – the trust deed introduces a concept to allow for the member to decide which document they want to take precedent in the event of their death.  In many instances, conflicts can exist between death benefit nominations and pensions that provide uncertainty around the payment of death benefits.  By establishing the paramount document through the rules of the fund, it removes any uncertainty for the trustees in the event of a member’s death.
  • Ability to create various death benefit instructions – the updated trust deed will allow a member to dictate the level of flexibility or control they want in the payment of their death benefits.  The rules of the fund allow for a binding death benefit nomination (including non-lapsing), non-binding death benefit nomination, along with SMSF Will which introduces specific instruction for the payment of death benefits.  This may include specific instructions for different superannuation interests of a member, specific assets to be transferred, etc.  All death benefit nominations allow for cascading decisions in the event that a nominated beneficiary pre-deceases the member.
  • Estate planning flexibility with transfer balance cap – the rules of the fund provide complete flexibility for a surviving beneficiary to choose how death benefits are to be paid to them in the event of a member’s death and to be able to take the necessary steps to comply with their own transfer balance cap within the prescribed timeframes.  For example, this may include commencing a death benefit income stream, in addition to undertaking a rollback, in part or full, of the beneficiary’s existing pension to ensure that they do not breach their transfer balance cap.
  • Flexibility in fund earnings methodology – the rules of the fund allow the trustee to adopt different methods to attribute fund earnings.  This can be beneficial where the trustee wishes to adopt an investment reserve, or an alternate approach to allocating income for member specific investment strategies as a result of the prohibition for an SMSF to claim tax exemption using the segregated method where a member is in excess of $1.6 million.
  • Guardians for fund members – the governing rules allow for a member to appoint a fund guardian so that upon the death of the member, the guardian will police the payment of the member’s death benefits to ensure that they reach their intended recipients.  This is particularly beneficial for blended families (multiple marriages), or where there are special needs recipients (e.g. individuals who may be financially irresponsible).  

Guides to help explain and understand the rules of the fund
To help understand how the trust deed rules will apply,a guide has been created at the start of each rule that explains the specifics of the rule.  Each guide has been written in plain English that allows you to have an understanding of what each rule means.

Please note that the superannuation reforms have an impact on all members of self-managed super funds.  Thus, we are recommending all self-managed super funds update their fund’s existing trust deed.

In undertaking this trust deed update for all of our SMSF clients, we are able to provide the update to your fund trust deed for $330.00.

What you need to do
We ask that you please refer to the
attached authority form that outlines how you can send us the information required and payment to arrange for the trust deed upgrade.  ‍‍‍

Should you require further information about the impact of the new superannuation measures, please get in contact with us.