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The Hidden Risks of Losing an SMSF Trust Deed
 
 
   

The Hidden Risks of Losing an SMSF Trust Deed

News | Mehak Gaba | Released: 05/02/2025 | Read: 5 Mins

Losing a wallet is frustrating, but what if you lose your original SMSF trust deed? The consequences can be significant and complex which would affect your ability to manage your fund properly. So, what should you do if this happens?

 

As an SMSF trustee, you’re legally required to keep the trust deed for the life of the fund. The loss of trust deed can disrupt critical operations, such as opening bank accounts, obtaining SMSF loans, or acquiring assets, as third parties often require a certified hard copy of the original deed. Therefore, even if the physical and/or electronic copies of the signed original are available, these may not suffice if the original SMSF deed is in fact lost.  So, what steps can you take if you can't locate the original Trust Deed?
   

How to locate a lost SMSF Trust Deed?
   

Unlike companies, there is no central register of trusts, which is why it is vital to preserve the original SMSF trust deed. check the following sources to locate the original deed:

  • Accountants, auditors, financial planners, or financial institutions that have dealt with the SMSF.
  • The Titles Office, if the SMSF has owned real property.
  • The law firm or provider that originally established the SMSF.

If these attempts are unsuccessful, it's important to act quickly to avoid complications and find options to explore options to ensure the validity of SMSF.
   
   

What options are there if I cannot find the original Trust Deed?
   

A common misconception is that you can simply replace a lost SMSF trust deed with a new one signed by the trustee, and the issue is resolved. However, this is not the case.  Each situation is unique, and the actions you should take depend on the specific circumstances.

 

Option1: Seek Court Guidance (if SMSF deed is lost and there are no copies of the signed original or if there is uncertainty about the deed’s terms):

 

Pursuant to Section 63 of the Trustees Act 1925 (NSW), trustees may apply to the court for advice, guidance, or direction regarding the management or administration of SMSF property and interpretation of the SMSF's governing document.

 

The court can provide direction on how to proceed, and in some cases, it may authorize a replacement deed or confirm the terms of the SMSF. It is generally considered the safest course of action for a prudent trustee to apply for judicial advice and directions when the deed is lost. However, this is not a simple application, and it can be quite costly. 

 

The recent decision, Application by Ellasil Pty Ltd [2023] VSC 69, involved an application by the corporate trustee of an SMSF, Ellasil Pty Ltd, seeking orders and directions as to the validity of the deed of the fund.
   

Facts of the case of  Ellasil Pty Ltd [2023] VSC 69

   

Facts of the case:

 

  • The original SMSF trust deed, created in 1979, could not be found.
  • Available documents included amendments from 1989, 1996, and 2015, but there were gaps and issues like missing signatures and incorrect dating.
  • The court needed to decide whether the SMSF was validly established despite the missing original deed and execution issues.

 

Court’s Approach:

 

  • The court determined that despite the missing original deed, the available amendments from 1989, 1996, and 2015 confirmed the validity of the SMSF.
  • The 2015 deed was ruled as the valid governing deed for the SMSF, and trustees were allowed to rely on it.
  • The court did not mandate creating a new or replacement deed but instead relied on the existing documentation to confirm the validity of the fund and its operations.

 

Lessons for Trustees:

 

  • Seek legal advice or court clarification: If facing issues with missing or incomplete documents, seek legal advice or court clarification to ensure the SMSF’s continued legality.
  • Retain supporting documents: Trustees should maintain supporting documents, even if the original SMSF deed is lost, as later amendments can still validate the fund.
  • Reliance on later amendments: The 2015 deed, in this case, was considered the valid governing deed, demonstrating that trustees can rely on later amendments if the original deed is unavailable.
  • Ensure proper execution of documents: Ensure all documents, including amendments, are properly executed and dated to avoid legal issues.
  • Proactive approach: Trustees must be proactive and careful when dealing with lost trust deeds to ensure the SMSF remains compliant and valid.
   
  

Option 2: Replacement Trust Deed or Deed of Confirmation (if copies of the Original Signed SMSF deed are available):

 

A replacement deed can be created if there is evidence of the original SMSF deed. Setting up a replacement deed is simple and can be done quickly on our platform, taking just about 10 minutes to complete.

 

When is a Replacement Deed Appropriate?

  • Evidence of Loss: Clear proof of the original deed’s loss is required, not just its unavailability.
  • Secondary Evidence: Documents like tax returns or financial statements or photocopy of original trustdeed or electronic version or you have a standard template SMSF deed or governing rules supplied by the supplier who supplied the lost deed.
  • Original Trust Deed Powers: The original trust deed must contain sufficient powers to support the adoption of the Deed of Confirmation.
  • No Break in Fund Continuity: The fund must show no break in continuity, ensuring the SMSF has operated smoothly despite the missing deed.

Application by Orlanski v Spiegel [2015] VSC 662, demonstrates that a deed of confirmation is a valid document, provided it is backed by sufficient evidence. Although the original evidence was found after five years, it was still considered a valid deed due to the supporting provisions from the original trust deed.
   

Orlanski v Spiegel [2015] VSC 662

   

Facts of the Case:

  • The original trust deed of the SMSF was thought to be lost.
  • Deed of confirmation was executed to validate the trust despite the missing original deed.
  • Five years after the deed of confirmation was executed, the original trust deed was located.
  • The original trust deed contained sufficient powers to support the adoption of the deed of confirmation.

Court’s Approach:

  • The court accepted the validity of the deed of confirmation, relying on the proven provisions of the original trust deed found later.
  • The original trust deed contained necessary powers, which validated the deed of confirmation despite the initial absence of the original deed.

Lessons for Trustees:

  • Deed of Confirmation Validity: If the original SMSF trust deed is thought to be lost, a deed of confirmation may be a valid solution, but only if original deed contains sufficient powers to support it.
  • Evidence for Confirmation: Trustees should carefully ensure that any deed of confirmation is backed by appropriate evidence like in this case law.
  • Proactive Search:Trustees should be proactive in searching for the original deed or supporting evidence. In this case, the original deed was found five years later, highlighting the importance of locating the original deed as it can be crucial to maintaining the trust's validity.
  

Deed of Confirmation of SMSF on Trustdeed

Follow the below given simple instructions:

  1. Login to your Trustdeed account on www.trustdeed.com.au or Click here to Register now.
  2. Go to SMSF Tools and select the Deed of Confirmation option ($275 including GST).
  3. Fill out the form and receive the necessary documents instantly. 

    • Deed of Confirmation of your self-managed superannuation fund.

    •  

      A replacement trust deed complying to all current rules.

       

    • Minutes to incorporate the new trust deed and related documents such as consents to be trustees, membership forms, death nomination forms etc.

    • Instruction sheet on what to do next.
   
   

Visit www.trustdeed.com.au for more details or call us on (02) 9684 4199
   

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