The area of self-managed superannuation funds has become increasingly popular with the introduction of the ability of superannuation funds to borrow. This has resulted in a large number of self-managed superfund's being established with mum and dad's being handed the keys to their own SMSF vehicle. This article takes a look at what issues face the practitioner in dealing with their client's SMSF requirements and what they need to do to ensure compliance and best practice in terms of their clients SMSF needs.
The first part of the journey normally involves the establishment of a self-managed superannuation fund for the client. Many practitioners still believe that they need to establish a fund that is over 100 pages long. Many practitioners with such deeds have not read them and acknowledge that their clients have not read the deed. This is very dangerous in these times and with the obligations being placed on trustees by the regulator (ATO), the courts and the legislation. It is imperative that advisors ensure that their clients acknowledge that they need to read what they are signing and understand their obligations. A well-crafted deed is capable of being read by the advisor, the client and other parties required to read the deed. It also doesn't need to be amended as many times as a deed which goes for over 100 pages.
What MGS has produced is a deed that is approximately 15 pages in length and has all the necessary clauses to comply with the requirements of the Superannuation Industry (Supervision) Act 1993 (SIS Act). The deed also contains the necessary borrowing clauses to comply with the bank’s requirements. Other than this the deed allows the trustees to do whatever is allowed under the SIS Act, therefore reducing the requirement to duplicate all of this in the deed itself. The other thing to remember is that if a transaction or other event is contemplated and for some reason the deed needs to be amended then it is a reasonably simple exercise. Reading through a 100+ page deed to undertake an amendment can cost a great deal of money.
Finally, many parts of the SIS Act allow the trustee to do things regardless of whether they are contained in the trust deed or not. For example, section 115 of the SIS Act allows the trustee of a self-managed superfund to maintain reserves. Subsection 115(2) states that reserves may be maintained unless the fund rules prohibit the maintenance of reserves. However, this did not stop one provider of self-managed superfunds from recommending to all their client's that their deeds be amended to insert a clause allowing the maintenance of reserves.
