Sent: 10-08-2010 11:18:06
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Updating SMSF trust deeds
This week in my DIY Super column in The Australian I attempt to deal with the thorny issue of general compliance and catch-all clauses in Self Managed Super Fund trust deeds.
It seems to me that this is certainly a topic which very few are willing to discuss in any way.
The legal issues of any trust are not without their complexity and general compliance and catch-all clauses have been used for about 20 years as a attempted mechanism to ensure that SMSF trustees do not have to continually update their fund's trust deed.
There is nothing wrong with this objective if it saves client's money and administrative hassle.
However the use of these clauses is often based on the mistaken view that super funds and how they run is only impacted by Commonwealth tax and regulatory rules.
Given Australia is a Federation of independent States and a successor of the British court system, this typically Australian provincial view clearly short sighted.
To misuse a famous quote, no super fund is an island. In other words, super fund's are also impacted by the actions and strategies other super funds employ.
It may well be that from one year to the next, the changes which should be made to a super fund trust deed have little or nothing to do with Federal law.
Some lawyers might be tempted to argue that SMSF trustees should seek legal advice every time they wish to conduct a transaction not specifically catered for in their trust deed to make sure the fund's general compliance clause or catch-all clause work thereby taking away the need to continually update a trust deed.
As most SMSF trustees are unwilling to regularly update their super fund trust deeds because of cost, why would they want to incur a regular legal bill?
I wouldn't be at all surprised if some SMSF accountants and administrators feel a little squeamish when providing advice to their trustee clients about the suitability of a fund's trust deed for certain particular transactions. After all is this advice covered by PI insurance? Some might take the view that they sometimes are very close to providing legal advice.
From an administration perspective, referring to many different general compliance and catch all clauses must be lots of fun.
This trust deed issue should not be seen as an Achilles heel of SMSFs and a reason for other superannuation vehicles to attack SMSFs.
The need to continually update super fund trust deeds is a challenge for all super funds. Large super funds are continually changing their trust deed and clearly have the financial resources to make sure this job occurs quickly.
Well these are my views. Unbeknownst to me there may be a clever lawyer who has found a way around these problems.
You can read my Australian article here: http://www.atcbiz.com.au/r.php?r=x785drk
Finally please consider purchasing a copy of "A How To Book Of Self Managed Super Funds". You can look at the contents page at the following link: http://www.atcbiz.com.au/r.php?r=0mjd6ne
The second edition has just been released.
Two options are available - once only subscription - $55 inc GST - or an annual subscription will gives you access to all the updates made throughout the year ($120 inc GST). The book can be purchased at the following link: http://www.atcbiz.com.au/r.php?r=5a4agqb
This email is general in nature only and does not constitute or convey specific or professional advice. Legislation changes may occur quickly. Formal advice should be sought before acting in any of the areas discussed. Be aware that the information in these articles may become innaccurate with time. Responsibility is disclaimed for any inaccuracies, errors or omissions. Particular investments are neither invited nor recommended and hence this publication is not "financial product advice" as defined in Section 766B of the above legislation. All expressions of opinion by contributors are published on the basis that they are not to be regarded as expressing the official opinion of any other person or entity unless expressly stated. No responsibility for the accuracy of the opinions or information contained in the contributor's articles is accepted by any other person or entity. Copyright: This publication is copyright. If you wish to reproduce this article you require a license, which can be purchased here, to do so.