SMSF trust deeds: Rules, guidelines and updates

If you want to run your own self-managed super fund (SMSF), there are some administrative tasks you need to complete before you can get onto the more exciting business of investing. One of these tasks is to draw up a trust deed.

What is an SMSF trust deed?

An SMSF trust deed is a legal document that outlines how the super fund will be set up and how it will operate. In short, it states the rules governing your fund – what it can and can’t do.

An Australian SMSF must be set up as a trust and established with a trust deed that complies with Australian superannuation legislation.

A trust is a legal structure where an individual or company trustee holds assets in trust for the benefit of others (the beneficiaries).

Why is a trust deed necessary?

A super fund is a special type of trust, set up and maintained for the sole purpose of providing retirement benefits to its members (the beneficiaries). To enjoy the tax benefits of super, an SMSF trust deed must be set up correctly.

SMSFs are regulated by the Australian Taxation Office (ATO), which monitors their compliance with super legislation and can impose a range of penalties for non-compliance.

The four essential requirements for establishing a trust are:

1. A trust deed.
2. An SMSF can have up to six members.
3. Every member of an SMSF must also be a trustee of their fund or a director of a corporate trustee. SMSF trustees are responsible for managing the fund to ensure its compliance with Australian super legislation.
4. An asset (or assets). SMSFs can be started with a nominal amount (for example $10) that is allocated to a member or members of the fund. Alternatively, the pre-existing super balances of members in other super funds (such as retail or industry funds) can be rolled into an SMSF as its initial assets.

What information is included in the deed?

Information contained in an SMSF trust deed will typically include:

• The names of the members and individual trustees (or the names of the fund’s directors if the fund has been set up with a corporate trustee structure).
• The objective of the SMSF. All Australian super funds (including SMSFs) must be set up for the sole purpose of providing retirement benefits to fund members (or to their dependants when they die).
• Rules that allow the trustees or directors to implement the fund’s investment strategy. Trustees/directors must also document an investment strategy as part of the SMSF set-up process. The trust deed should outline the specific types of investments that the trustees/directors can make.
• Rules that outline how the fund will be administered, how member benefits will be paid (as a lump sum or pension), and the circumstances in which the fund will be wound up.

Where can I get an SMSF trust deed?

If your SMSF needs are reasonably straightforward, you can purchase standard SMSF trust deeds online.

However, if your SMSF arrangements are likely to be more complex or you would value the oversight of an expert, it is advisable to hire an experienced professional to help you prepare your fund’s trust deed. This will help to ensure it complies with super legislation.

It’s also important that all trustees/directors are involved in discussions during the preparation of the deed, so there is clear agreement and understanding about how the fund will be managed right from the start.

SMSF trust deeds are not subject to stamp duty, except in the Northern Territory where a nominal fee is charged.

When do I need to update the trust deed?