Bad Deeds: Is your SMSF at risk?
October 2015
Australian SMSFs totalled 414, 168 in June 2015, yet despite their popularity, many SMSF trustees are unaware of what their trust's deed says, particularly regarding what it does and does not allow.
Check that your deed allows the types of payments being made
One of the more common issues that come out of auditing your SMSF is that often an SMSF pays pensions and other payments to members that aren't allowed by the trust deed. There is often an assumption that because superannuation laws allow for these types of payments that it's okay.
Check that the trust deed is updated with life changes and estate planning needs.
There are several aspects of an SMSF deed that will have a direct impact if you die or your circumstances change. It's important to keep your deeds up to date via regular review to ensure it meets your current circumstances, not just those that existed when you created the deed. For example:
- Does your deed allow you to nominate the person (or people) who will receive your super when you die? Some deeds don't allow for binding death nominations and in some cases, the remaining trustees decide who gets your super.
- If you have death nominations in place, is the wording consistent with requirements of the trust deed?
- Is it clear who has the power to add or remove trustees? There are a lot of court cases involving children who were excluded from a parent's super by a new spouse – and vice versa.
- When does someone become or stop being a member? Some deeds will automatically remove members with a nil balance.
- Does your deed allow the use of reserves or other strategies that your accountant may recommend at year end to minimise tax? Some deeds don't allow for effective tax planning strategies!
Check with your accountant
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Disclaimer
This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.
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