As we pass through the self-managed super fund (SMSF) Annual Return (SAR) season, it’s likely you recently went through the process of locating all of the required information and documentation in order to prepare your SMSF tax return. Did you find the original copy of your SMSF Trust Deed? And have you put it back somewhere safe?
If you’re in the unfortunate position of having lost your SMSF Trust Deed, simply obtaining a new copy to carry on may not be an option. Creating a new SMSF is the best solution for a lost deed; continue reading as we walk you through exactly why and the steps you can take.
Where to look
When setting up a self-managed super fund, there are many practitioners and places that your deed is copied, sighted and potentially stored. A lost deed may not be lost, but either misplaced or stored so securely that it’s ‘out of sight and thus out of mind’. Consider:
- Contacting the legal practice that assisted in supplying the deed originally.
- Contacting all accountants, banks, auditors, financial planners or other financial institutions who would likely have taken a copy or sighted the deed throughout their administration. This is particularly relevant if you have a self-managed super fund loan.
- Checking the location where most of your other financial documents are stored. This may even be in a safety deposit box at a bank or a secured filing cabinet.
My self-managed super funds Trust Deed is definitely lost – what next?
In the absence of a trust deed, an SMSF Trustee is not able to say for certain whether they’re following the rules stipulated in the fund. If you’re looking at using an SMSF loan or have an existing limited recourse borrowing arrangement (LRBA), a lost trust deed can spell disaster as the lender will need to check on the specific powers in the deed (as will your SMSF auditor!).
Your options for having completely lost your trust deed are:
Wind up the self-managed super fund
The amount of time, effort, and cost you’ve outlaid in setting up a self-managed super fund can be waved goodbye, but not after incurring even further administration and legal costs to wind the fund up. Not to mention the complexity of selling down assets, particularly property assets linked to an SMSF loan. Most of all, you’ll no longer hold your SMSF and could likely be significantly damaging your financial future and retirement savings.
Continue operating without a deed
Nothing alerts us at SMSF Loan Experts to danger stronger than an SMSF continuing to operate without a trust deed. Given that SMSFs are a trust, a trust deed is legally required to operate the trust. The Australian Taxation Office (ATO), which regulates SMSFs, make it a requirement that SMSF Trustees retain the original hard copy of their fund’s trust deed while the fund is in operation and for a five year period after the fund’s annual tax return is submitted. The risk of penalisation through an audit is great enough, but then, of course, there are the limitations with not being able to obtain further SMSF bank accounts or SMSF loans. Furthermore, without a deed, there is no reference as to who should receive your super monies at your passing!
Draw up a Deed of Variation
A Deed of Variation is a popular way to overcome losing the original trust deed. However, it is not a fail-safe solution. It is likely that without a copy of the original, you will not be able to construct a variation to the deed and will be left with the only option being to apply to the supreme court. If you are able to draw up a deed of variation, it will need to be with as many parties to your SMSF as possible. You may not want to get your children, ex-partners or business partners involved, especially considering the deed of variation can still be challenged.
Apply for a court order
Applying to the relevant Supreme Court in an SMSF Trustee’s area is typically the course of action followed when an SMSF Trust Deed has been lost. A court order provides a legal basis to continue operating the SMSF from. However, you need to be able to convince the court to a reasonable standard that any executed documents ever existed to constitute the trust.
On top of that, the court requires evidence of the terms of the trust deed. So if you’ve been able to uncover a template or unexecuted copy of your SMSF Trust Deed, then this will go a long way to helping prove evidence of the terms within your deed. However, it’s not a guarantee that the court will grant your order.
If all of that wasn’t enough, applying to the Supreme Court can be extremely costly and take a significant amount of time.
Establish a new SMSF fund
The best alternative to the costly and timely exercise of applying to a Supreme Court is by establishing a new SMSF. In most cases, you’ll be able to rollover your assets, and legally, it’s the strongest, most secure and most certain option to avoid your existing fund being challenged or restricted in its ability to operate.
Not only is establishing a new fund cheaper and less time consuming than applying to the supreme court for an order, but it’s also safer and less complicated than merging with another fund.
You’ll need your Trust Deed for an SMSF loan
Accessing SMSF home loans for residential or commercial property investment within your SMSF can be a terrific way to grow your superannuation savings. In order to establish a limited recourse borrowing arrangement for an investment property loan, we’d also need to check out your SMSF Trust Deed — so make sure you’ve got it somewhere safe! Contact us today to find out how we can guide you into investment success.