SMSFs warned about the limitations of trust deeds with beneficiaries

SMSF trustees have been advised to check their trust deed when naming beneficiaries as there may be very specific limitations, a law firm says.

Speaking in a recent webinar, Cooper Grace Ward Lawyers partner Clinton Jackson explained that while the Superannuation Industry (Supervision) Act (SIS law) defines who can be designated as a beneficiary, there are much more limited acts than what the SIS law provides.

“There are a number of deeds that for some reason are not drawn up [the limitations on beneficiaries] as broadly as SIS law permits,” Jackson said.

“For example, there are acts that only allow you to make an appointment in favor of dependents and not in favor of the LPR.”

Mr. Jackson said SMSF professionals and their clients should therefore read the deed and check what the limitations are.

“Make sure the person you name is an eligible beneficiary under your deed as well as the SIS Act,” he said.

“We still see clients who want to name their mother or their aunt or their cousins ​​and all that sort of thing. We know they fall outside the SIS law most of the time, but check your deed because sometimes deeds have some really unusual examples.

Scott Hay-Bartlem, partner at Cooper Grace Ward Lawyers, said it’s also important to know that the definition of spouse and child has evolved over the years.

“Some acts are really narrow and really obsessed, in the early 2000s spouses only included opposite-sex couples. Interdependent relationships were only introduced in 2000 as a Democratic compromise for the GST,” Hay-Bartlem noted.

“So if you have an old deed, you can’t pick up all these things and you might not realize it until you burn the deed.”

Miranda Brownlee

Miranda Brownlee is the Deputy Editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF industry.

Since joining the team in 2014, Miranda has been responsible for breaking some of Australia’s biggest superannuation stories and has reported extensively on technical strategy and legislative updates.
Miranda also has extensive experience in business and financial services reporting, having written for titles such as Investor Daily, ifa and Accountants Daily.

SMSFs warned about the limitations of trust deeds with beneficiaries

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Last update: July 06, 2022

Posted: July 06, 2022

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