SUPERANNUATION FUND FAQ

SUPERANNUATION FUND FAQ

1              What is a Superannuation Fund?

It is an indefinitely continuing Fund set up as a trust to enable members and employers to contribute money over a period of years to provide for the members and member’s dependants when the member retires or dies.

2              How is a binding death benefit nomination updated?

Except in the case of a Self Managed Superannuation Fund a binding death benefit is only valid for three years so each three years a binding death nomination must be remade.  That is, a new binding death benefit nomination must be made each three years.

It is not mandatory for Self Managed Superannuation Funds to require that a Binding Nomination be renewed every three years.

A Deed may provide that the Nomination must be renewed every three years but that is not necessary.  A Deed can also provide that there can be an agreement between the Trustee and the members (that binds the Trustee) setting out how the member benefits are to be distributed if the member dies.

3              When should a Superannuation Fund Deed be updated?

A Superannuation Fund should be updated whenever there is a significant change in the law.  As a general rule of thumb the Trustees of a Superannuation Fund should consider reviewing the Deed every two years and should update at least every four years.

4              How is the name of a Deed changed?

It is not possible to change the name of a Deed.  However, it is possible to change the name of a fund.  That is done by the Trustee electing to change the name of the fund and then confirming that election in writing.  A Trustee must ensure that if a fund changes its name that every person who has business dealings with the trust (including the Commissioner of Taxation) and every member of the trust is notified of the change of name.

5              Does a Trust have to have a Trustee?

Yes, every trust must have a Trustee.  This is because the law requires that for a trust to exist there must firstly be some trust property and secondly a Trustee (or Trustees) who holds the trust property on trust for a beneficiary or beneficiaries.

In the case of Self Managed Superannuation Funds the Superannuation Laws requires that a Superannuation Fund must have a Trustee.

6              Who can be a Trustee of a Superannuation Fund?

Under section 17 of the SIS Act the members must be the Trustees or if the Trustee is a company, then the directors of the trustee company must be the members.  When the Trustees are individuals then the principal purpose (but not necessarily the only purpose) of the fund must be to pay pensions.  That restriction does not apply in the case of a company being the Trustee.

If there is only one member of the fund then a single member company may be the Trustee and the single member must be the director.  If the fund is a single member fund and the Trustee are individuals then because of the rule that requires a Trustee to be different from the beneficiary (member) then there must be a second trustee who must not be an employer of the member unless the person is also related to the member.

Minors (a person under 18) cannot be Trustees or directors of a trustee company, but a Legal Personal Representative of a minor can represent the minor.

Bankrupt and disqualified persons cannot be Trustees or directors of a trustee company.

7              Can the Trustee of an Asset Acquisition Trust for Superannuation Fund be the same as the Trustee of the Superannuation Fund?

No, the Superannuation Industry Supervision Act is specific.  Under section 67 A & B the Trustee must be a different legal person.  The Trustee can be an individual, a group of individuals or a company. The directors of the company can be the same as he members of the fund.

8              How is the State of Jurisdiction of a Superannuation Fund Changed?

The State of jurisdiction of a trust (a Superannuation Fund is a trust) is determined by where the trust conducts its business.  As soon as a trust (the trust is made up of the trust assets) is moved from one State to the other then the jurisdiction of the trust moves to the new State.

Superannuation Funds are governed by Commonwealth Law so the laws governing Superannuation Funds is the same in every State.

9              How long does a Superannuation Trust last?

Under a specific provision in Superannuation Industry Supervision Act a Superannuation Fund is not limited to a maximum life of 80 years (as with other trusts) and must be capable of continuing indefinitely.

10          How is a Trust wound up?

A Trustee winds up a Fund by firstly making a declaration (in writing) that the trust is to vest (that is the trust is to end and the trust assets are to be distributed to the beneficiaries).

The Trustee must collect all of the trust assets and then convert them into cash (unless the Trustee proposes to make an in specie distribution).  All debts of the trust must be paid and all tax must be paid.  The assets (or cash) are then distributed amongst the members or members’ dependants according to each member’s share in the fund.

If any member is under the age (retirement after age 55, permanent disability, death, etc..) when the fund can make payments to the member then that particular member’s share must be paid to another complying Superannuation Fund.

Notice must be given to the Taxation Department that the trust has ceased to exist.

11          For the purposes of my Will do I own my member share in my Superannuation Fund?

No, a Superannuation Fund is a Trust.  As a consequence a member of a Superannuation Fund does not “own” any part of the fund or any of its assets.  A member may make a Binding or Non Binding Nomination directing how the Trustee is to distribute the members share upon a member’s death but a member cannot deal with a Superannuation interest in his or her Will.

If there is no nomination then the Trustee must distribute the member’s share to the member’s dependants (the Trustee must exercise a reasonable discretion when determining how to distribute).  If there are no dependants then the Trustee must distribute to the deceased member’s Legal Personal Representative.  Once that is done the amount distributed becomes part of the deceased member’s estate and is then distributed in accordance with the deceased member’s Will.