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DBA Lawyers’ SMSF governing rules

Daniel Butler ([email protected]), Director, DBA Lawyers 

Not only does DBA Lawyers have the best SMSF governing rules and related SMSF documents available, we offer many value added benefits that are not available elsewhere.

Recent changes to DBA Lawyers’ SMSF governing rules

The new and improved version of the DBA Lawyers’ SMSF governing rules come with the following upgrades:

  • updated retirement phase provisions for transition to retirement income streams (‘TRISs’) to cater to recent legislative changes relating to TRISs that revert on death;
  • expanded contribution splitting powers;
  • expanded contribution reserving powers;
  • expanded succession powers for payments to members;
  • enhanced binding death benefit nomination (‘BDBN’) provisions;
  • expanded power for an SMSF trustee to pay out insurance proceeds;
  • expanded conditional membership powers; and
  • expanded powers to withhold and remit various taxes to the ATO.

Naturally, the above upgrades are on top of the already great features our governing rules provide.

General features of the DBA Lawyers’ SMSF governing rules

  • Rules are up to date with superannuation law — We update our governing rules annually to cover all relevant changes (including superannuation law, case law and ATO materials).
  • Strategic rules for power to appoint and remove trustees — Members who hold more than 50% of benefits in the fund have the power to appoint and remove the trustee. Click here for more information on SMSF succession.
  • Allows for successor trustees — We provide for successor trustees (for example, a trustee’s legal personal representative (‘LPR’)) to step in as trustee on the death or loss of capacity of an existing trustee. The DBA Lawyers’ company constitution contains similar provisions for successor directors.
  • Streamlined and effective BDBN rules — Our BDBN documentation does not rely on the Superannuation Industry (Supervision) Act 1993 (Cth) (‘SISA’) or Superannuation Industry (Supervision) Regulations 1994 (Cth) (‘SISR’) provisions and provides a firm basis for making an effective BDBN. Click here for more information on BDBNs. We also provide express wording in the event there is any conflict between a reversionary nomination and a BDBN. Click here for more information.
  • BDBN value-added template — A strategic BDBN template is provided which, among other things, allows for two levels of cascading and allows a member to make their pension automatically reversionary, overriding the pension documents as necessary.
  • Members’ wishes can be represented by attorney or executor — A member’s rights can also be exercised by the member’s LPR. Accordingly, where a member is dead or incapacitated, their LPR (eg, the member’s attorney acting under an enduring power of attorney or, following their death, the executors of the deceased’s estate) can exercise the member’s rights in the member’s place, eg, a withdrawal of benefits before a member’s death if the member has only days to live.
  • Power to admit conditional members — It is very difficult to remove a member from an SMSF once there is a falling out. Members can be admitted subject to certain trigger events that force them to exit the fund automatically. This can serve as a useful tool especially where a second spouse or children are included in an SMSF and there is a falling out. Refer to our articles entitled The advantages of conditional membership in an SMSF and Admit a conditional member.

Strategic and other advantages of the DBA Lawyers’ SMSF governing rules

  • Latest SMSF strategies and traps covered — We include the latest SMSF, tax, stamp duty and asset protection strategies in our SMSF governing rules. For example, our SMSF governing rules include protection so pension payments cannot be accessed by creditors.
  • Trustees empowered to do normally restricted things — Many do not realise that a trustee is generally not permitted to carry on a business (eg, a property development business), be remunerated for services, invest in a non-income producing asset or invest in a single bulky asset without diversification, unless the trust’s governing rules permit. Our governing rules empower these activities and much more. Many other suppliers’ documents do not, and therefore expose trustees to being sued by a disgruntled beneficiary when they suffer any loss or damage.
  • Detailed memo and PDS — A detailed SMSF memo and PDS are included with our new SMSF and SMSF deed updates. These documents, in addition to complying with the law, can greatly assist members and trustees to understand their duties and entitlements.
  • Eligible for the Annual Update Service — For those who want peace of mind that an SMSF’s governing rules are kept up to date, we offer the Annual Update Service that provides our latest SMSF governing rules, PDS and SMSF Memo each 1 July for a small annual cost. Many advisers enjoy an added benefit from the Annual Update Service because all their SMSFs have our latest governing rules, allowing for easier administration and compliance.
  • Backed by lawyer support —Every DBA Lawyers document package is reviewed and signed-off by one of our expert SMSF lawyers. Using us for documents means you get the best support. Many other suppliers claim they have legal sign-off but what was actually signed off by whom, when and when you review some suppliers’ terms and conditions they simply ‘cast you to the wind’.

Risks of using a non-DBA Lawyers’ SMSF deed and governing rules

In contrast to DBA Lawyers’ SMSF governing rules, we briefly summarise some of the shortcomings we find when reviewing other suppliers’ documents:

  • Despite some suppliers claiming they have the latest provisions, their documents were considerably out of date and did not correctly reflect the law nor the latest strategies.
  • Some suppliers’ SMSF deeds or governing rules do not provide firm BDBN provisions that can be relied on, especially where the governing rules rely on the BDBN criteria in the SISA and the SISR. The Supreme Court of South Australia in Retail Employees Superannuation Pty Ltd v Pain [2016] SASC 121 stated at [512]:

The structure and drafting of sections 58 and 59 of the SIS Act and regulation 6.17A of the SIS Regulations give rise to ambiguities, uncertainties and potentially unintended consequences … It is highly desirable that those provisions be reviewed by the Commonwealth and recast.

The BDBN provisions in the DBA Lawyers’ SMSF governing rules do not rely on the SISA or SISR provisions. Many other SMSF suppliers’ governing rules do, and are therefore prone to attack.

Note that DBA Lawyers is regularly engaged to challenge BDBNs and our general view is that no BDBN is binding unless it is proved to an SMSF lawyer’s satisfaction. Refer to the article we prepared prior to the REST decision above entitled The legal minefield of BDBNs (updated) where we outline several factors on why most BDBNs fail. This is one reason why we strongly recommend that each BDBN be prepared or at least reviewed by a lawyer with SMSF expertise.

  • Some governing rules by other suppliers do not provide the requisite power to ensure that an automatically reversionary pension will satisfy the ATO’s criteria in TR 2013/5 and LCG 2017/3. The SMSF governing rules must, among other things, include a power to fetter or limit the trustee’s discretion. The ATO consider that any discretion will render an automatically reversionary pension useless.

Moreover, many other suppliers’ SMSF governing rules do not expressly deal with what takes priority in the event that a reversionary pension nomination conflicts with a BDBN (assuming both of these requests are valid and binding). For example, under some, a pension nomination will render a BDBN and any related estate planning based on that BDBN useless. This may give rise to considerable risk unless the user has a sound understanding of how to make a valid pension nomination and BDBN. Click here for an article on point with more information.

An SMSF’s governing rules is the cornerstone that makes or breaks many SMSF strategies. Accordingly, the DBA Lawyers’ SMSF governing rules represent tremendous value.

For an article on why SMSF deeds should be ordered from a law firm rather than a non-qualified supplier click here.

A new SMSF (with our governing rules) can be ordered here. An update to an existing SMSF’s deed can be ordered here.

We also offer a large range of related documents and services which complement our SMSF governing rules.

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Note: DBA Lawyers hold SMSF CPD training at venues all around. For more details or to register, visit www.dbanetwork.com.au or call 03 9092 9400.

For more information regarding how DBA Lawyers can assist in your SMSF practice, visit www.dbalawyers.com.au.

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