Now that the Simpler Super Rules have come into full effect, from 1 July 2007, it is important to ensure that your SMSF's Trust Deed incorporates all the rule changes to let you take advantage of the new simpler super benefits.

The rules of a SMSF are contained within the trust deed and it must adequately reflect the new laws and also allow the most current strategies available to its members. The changes to the super laws that have occurred in recent years – in particular those announced in the May 2006 federal budget known as Simpler Super mean that you may be missing out on many strategic opportunities such as:

• Making contributions up to age 65 without the need to meet the work test;

• Adding non-working members (e.g. spouse, children, etc);

• Splitting super contributions with your spouse;

• Members aged 55 or more accessing benefits prior to retirement (also known as transition to retirement);

• Having the ability to make contributions on your children's behalf;

• Creating wealth for the next generation of your family; and

• Having the ability to make contributions up to age 75;

• Creating tax free, flexible income streams in retirement to complement your lifestyle.

Common Trust Deed clauses/rules that will require updating

It is important to understand that whilst the Superannuation Law has been changed, that your SMSF cannot automatically utilise the new rules. The Trust Deed for the SMSF must specifically permit the Trustee(s) to do so. Here are some common Trust Deed clauses/rules that will require the Trust Deed to be upgraded:

Contribution Rules

The laws governing contributions have been updated prior to the Simpler Super Rules. However, many older Trust Deeds still contain clauses/rules which require a Member, who is under 65, to have been 'gainfully employed' for at least a week during the preceding two (2) year period before a contribution is made. This reflects the law prior to the current applicable law in this area, which does not require a Member who is under age 65 to meet any 'gainfully employment' test. Where a Trust Deed contains a clause/rule reflecting the old law, then the Trustees must adhere to it which will require the Member to follow a more restrictive test to make a contribution.

Further, the Simpler Super Rules now allow for a relevant person to claim an income tax deduction for contributions where they are aged 70 to 74. Prior to 1 July 2007, only Non Concessional (Undeducted) contributions by an individual could be made to a superannuation fund. Again, many Trust Deed clauses/rules reflected this law and thus will not allow Trustee(s) to accept contributions for a Member aged 70 to 74 where an income tax deduction is claimed.

Abolition of the Compulsory Cashing in Rules

From 10 May 2006 a person is no longer required to receive their superannuation benefits, either by lump sum or pension, where they turn 65 and are no longer 'gainfully employed' or turn 75. However, many Trust Deeds will still contain clauses requiring a Member to be paid their superannuation benefits in these circumstances. Unless this clause is amended to incorporate the new law, the Trustees must continue to adhere to the Trust Deed to pay out benefits where a Member is no longer 'gainfully employed' after age 65 or turns 75.

Transition to Retirement Pension

SMSF Trust Deeds which are written prior to 1 July 2005 will not include a provision which will allow a Member to access their superannuation, in the form of a non-commutable income stream, without having to be 'retired'.

Adoption of a new Pension Payment Standards

The new Simpler Super Law deems any pre 1 July 2007 Allocated Pension to meet the new Simpler Super minimum pension standards. However, if the Member wishes to adopt the new pension payment standards, i.e. the minimum 4% (increasing with age) and no maximum, then the rules of the Trust Deed must incorporate the new pension payment standards, as per Regulation 1.06(9A) (payment standards as per Schedule 7), the pre 1 July 2007 Allocated Pension is governed by Regulation 1.06(4) and the payment standards are contained in Schedule 1A.

Consequently, where a Trust Deed is not updated to incorporate the Simpler Super Rules, the pre 1 July 2007 Allocated Pension must continue to be paid in accordance with the old payment standards, i.e. minimum and maximum pension with reference to PVF in Schedule 1A.

Death Benefit Rule

Whilst most SMSF Trust Deeds include a provision for a Member to provide a Binding Death Benefit Nomination, such binding nominations have their limitations. These include: three (3) year time limit, only binding the Trustee to whom the benefit is paid and not the form of the benefit, e.g. lump or pension; there is also the issue concerning when a Member is incapacitated and what their Legal Personal Representative LPR) is able to do, confirm or amend at the end of the three (3) year period.

Trustee Voting Provisions

Most SMSF Trust Deeds will give each trustee one (1) vote to cast at a Trustee Meeting. This may disadvantage Members whose account balance comprises the majority of the fund or result in a stalemate when Trustees cannot agree. A more suitable SMSF Trust Deed contains rules which say that the number of votes that a Trustee can cast at a Trustee Meeting is equal to their representative member Account balance.