Pro-forma Draft Letter to Clients of a Professional Firm Offering to Update Super Fund Trust Deeds
Please feel free to modify this and use it as you wish. [Note, you should not modify or use this in such a manner that it implies that Pro-Super is the entity which is recommending that trust deeds be amended. We have no relationship with your clients. Our relationship is with you, the accountant/planner/SMSF professional.]
When Should Trust Deeds Be Amended?
A few times a year, one or more of Pro-Super’s competitors send out marketing material trying to scare/persuade accountants and planners to upgrade their clients’ deed en masse. Invariably, they use words like “might”, “could”, “may not allow” and other such fudging language.
Now, don’t get us wrong, Pro-Super likes a good round of deed amendments as much as the next supplier – we make good money from it. However, the last time there was a compulsory requirement for deed amendments was back in 1993, when the SIS Act was introduced. We could easily jump on the bandwagon and frighten you all into upgrading all of your clients’ deeds, but that just isn’t the way Pro-Super operates.
There are a few unquestionable facts, when it comes to trust deeds. The first is that the Government changes the superannuation law more frequently than they change their shirts. The second is that, if you told your clients they needed to amend their trust deeds every time the law changed, they’d lynch you!
A third is that a good “catch-all” clause, which deems any legislative changes to be incorporated into the deed, will negate the need to upgrade a deed for legislative changes in all cases, except those in which the Government actually specify that the deed needs to be physically amended to incorporate the change (this has only happened once in the past 12 years, as we explain below).
The only time a deed needed to be specifically amended to incorporate changes since the SIS Act started was upon the introduction of binding death benefit nominations, in mid-1999. For primarily technical reasons to do with the way these changes were introduced, it could have been argued that all funds would be obliged to accept a binding nomination from a member, if the Government didn’t specify that the fund needed to amend its deed to allow the nominations. These changes were intended to be optional, not compulsory, hence the unusual amendment requirement. So, even if your client has a pre-1999 deed, if they don’t want to put a binding nomination in place, this wouldn’t qualify as a reason to amend their deed.
Apart from changes which are contained in the legislation, there are certain industry “innovations”, which do not derive from the legislation, but which might be handy to have. A catch-all clause cannot allow these types of things.
Finally, there is the risk that a client will pick up a deed which is seven or eight years old and read it. Yes, we know, it’s unusual for a client to read a deed, but we all have diligent and thorough people in our client bases. Those who do examine an out-of-date deed and decide, based on what is says, that they can pursue a particular course of action, might be surprised when you discover what they’ve done after year end and call to tell them that it was outlawed six years ago.
In summary, while your clients can’t be expected to update their deeds every time the legislation changes and while it is certainly not compulsory for them to do so, if the deed is more than, say, five years old it might not be such a bad idea to suggest they do so. In certain circumstances (eg. where the catch-all clause is defective, where they have a pre-1999 deed and want a binding nomination, or if they want to put a non-lapsing binding nomination in place) they actually will need to update their deeds.
It is incorrect, however, for anyone to suggest to you that your clients must upgrade their deeds.