Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 139

Importance of updating your SMSF Trust Deed

The Trust Deed for an SMSF is the Fund’s most important document. It forms the core component of the Fund’s governing rules. Whilst legislation typically stipulates what trustees must not do, the governing rules of a Fund specify what trustees are allowed to do.

For example, the appointment of an Enduring Power of Attorney to stand in the shoes of an incapacitated trustee must be expressly permitted in the Fund’s governing rules. Merely having an Enduring Power of Attorney does not of itself mean that an Enduring Power of Attorney is appointed upon a trustee losing mental capacity. The Fund’s governing rules must provide the mechanism for the removal of a trustee that has lost mental capacity.

Therefore, if the Fund’s governing rules do not expressly allow for this to occur, the appointment of the incapacitated trustee can have serious ramifications for the Fund’s qualification as a complying superannuation fund. Superannuation regulations do not state a Legal Personal Representative (LPR) is automatically appointed if a trustee loses mental capacity. If not correctly documented in the Trust Deed, the Fund may not be able to be restructured to remove the incapacitated trustee. This may render the Fund inoperative, as all trustees must actively make decisions regarding the Fund (including the removal of a trustee).

The requirement for updating your SMSF Trust Deed can come from many sources:

Changes in legislation

Some of the more prominent recent changes in superannuation legislation are:

  • Refund of excess concessional contributions
  • Limited Recourse Borrowing Arrangements
  • Remuneration of trustees
  • Covenants to be included in the Fund’s governing rules
  • Requirement to report assets at market value
  • Requirement for the trustees to consider insurance for members.

Court cases and decisions

Recent court cases such as Ioppolo & Hesford (as executors of the estate of the late Francesca Conti) v Conti & Anor [2013] WASC 389 and Wooster v Morris [2013] VSC 594 outline the importance of sound estate planning practices, such as Binding Death Benefit Nominations (BDBN). An SMSF member is not automatically granted a BDBN; the Fund’s governing rules must allow for such direction to the trustee (this may include a non-lapsing BDBN). With regard to death benefit payments, the Fund’s governing rules are crucial in determining who will run the Fund once a member has passed away.

Change of member circumstances

Changes in personal circumstances may also warrant a review of the Trust Deed to see if it is up-to-date. For example, a member may look to go from accumulation phase to Transition to Retirement (TTR) pension phase. If the Fund’s Trust Deed is an older deed, it may only allow for a pension to commence once the member has retired. Again, there is nothing in the legislation that states a particular Fund can commence a TTR for a member.

Relying on deeming clauses in the Trust Deed will not provide the ability for the Fund to pay such a pension because the legislation only defines a TTR and outlines the payment rules for such an income stream, but there is no mention of a Fund’s ability to pay such a pension. Unless the Fund’s governing rules expressly allow for a TTR, then it is likely the Fund may breach its governing rules if it pays a TTR income stream.

Requirements by third parties

It may be prudent (or a requirement) to update the Trust Deed if the trustees are looking to undertake a specific investment. For example, a bank may require a Deed to expressly allow for Limited Recourse Borrowing Arrangements before it provides finance to the SMSF, or it may be necessary to upgrade the Fund’s governing rules to undertake a derivatives transaction.

Don’t rely on an old Trust Deed

Without an up-to-date Trust Deed, the trustee may not be able to operate in a way that it wishes without being in breach of trust. Beneficiaries may also take action against trustees for losses or damage (for example, if a particular strategy needs to be unwound). Beneficiaries are not limited to seeking recompense from trustees under this section, but also third parties such as accountants and financial planners.

How often should your SMSF Trust Deed be upgraded? It is prudent to upgrade the Deed regularly by using an online updating service. This type of proactive service ensures a Fund’s governing rules are current, as well as providing accountants and advisers with comfort that all their clients’ Deeds are the same, making it much easier to administer the funds and advise trustees. SMSF auditors are also required by the Audit Standards to determine whether the trustees are acting in accordance with the Fund’s governing rules.

 

Nicholas Ali is Head of Technical Services & Education at SuperIQ and SuperConcepts. This article is for educational purposes only and does not address the needs of any individual. It is believed to be accurate at the time of writing but rules or interpretations may change.

For more articles and papers from SuperConcepts, a sponsor of Firstlinks, please click here.

 

RELATED ARTICLES

7 vital steps to compliance for your SMSF

Every SMSF trustee should have an Enduring Power of Attorney

Why SMSFs should have a corporate trustee

banner

Most viewed in recent weeks

Simple maths says the AI investment boom ends badly

This AI cycle feels less like a revolution and more like a rerun. Just like fibre in 2000, shale in 2014, and cannabis in 2019, the technology or product is real but the capital cycle will be brutal. Investors beware.

Why we should follow Canada and cut migration

An explosion in low-skilled migration to Australia has depressed wages, killed productivity, and cut rental vacancy rates to near decades-lows. It’s time both sides of politics addressed the issue.

Are LICs licked?

LICs are continuing to struggle with large discounts and frustrated investors are wondering whether it’s worth holding onto them. This explains why the next 6-12 months will be make or break for many LICs.

Australian house price speculators: What were you thinking?

Australian housing’s 50-year boom was driven by falling rates and rising borrowing power — not rent or yield. With those drivers exhausted, future returns must reconcile with economic fundamentals. Are we ready?

Retirement income expectations hit new highs

Younger Australians think they’ll need $100k a year in retirement - nearly double what current retirees spend. Expectations are rising fast, but are they realistic or just another case of lifestyle inflation?

Welcome to Firstlinks Edition 627 with weekend update

This week, I got the news that my mother has dementia. It came shortly after my father received the same diagnosis. This is a meditation on getting old and my regrets in not getting my parents’ affairs in order sooner.

  • 4 September 2025

Latest Updates

Shares

Why the ASX may be more expensive than the US market

On every valuation metric, the US appears significantly more expensive than Australia. However, American companies are also much more profitable than ours, which means the ASX may be more overvalued than most think.

Economy

No one holds the government to account on spending

Government spending is out of control and there's little sign that Labor will curb it. We need enforceable rules on spending and an empowered budget office to ensure governments act responsibly with taxpayers money.

Retirement

Why a traditional retirement may be pushed back 25 years

The idea of stopping work during your sixties is a man-made concept from another age. In a world where many jobs are knowledge based and can be done from anywhere, it may no longer make much sense at all.

Shares

The quiet winners of AI competition

The tech giants are in a money-throwing contest to secure AI supremacy and may fall short of high investor expectations. The companies supplying this arms race could offer a more attractive way to play AI adoption.

Preparing for aged care

Whether for yourself or a family member, it’s never too early to start thinking about aged care. This looks at the best ways to plan ahead, as well as the changes coming to aged care from November 1 this year.

Infrastructure

Renewable energy investment: gloom or boom?

ESG investing has fallen out of favour with many investors, and Trump's anti-green policies haven't helped. Yet, renewables investment is still surging, which could prove a boon for infrastructure companies.

Investing

The enduring wisdom of John Bogle in five quotes

From buying the whole market to controlling emotions, John Bogle’s legendary advice reminds investors that patience, discipline, and low costs are the keys to investment success in any market environment.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.