A self-managed super fund trust deed that contains even one of the following errors can strip the fund of its complying status under the Superannuation Industry (Supervision) Act 1993 — costing members the 15% concessional tax rate and exposing trustees to administrative penalties starting at $330 per penalty unit. Six specific drafting failures account for the majority of ATO compliance concerns.
1. The deed omits or undermines the sole-purpose test
Section 62 of the SIS Act requires an SMSF to be maintained for the sole purpose of providing retirement benefits to members, or benefits to their dependants on death. A deed that lists secondary purposes — such as asset protection for a related business, investment diversification for the trustees personally, or providing income to a member before preservation age — fails this test.
The ATO's interpretive guidance on section 62 is explicit: having multiple purposes in the deed does not automatically cause a breach, but any purpose that conflicts with retirement provision creates a reviewable contravention. Trustees often copy commercial trust deed precedents that include purpose clauses too broad for SMSF use. Strip them out. The sole-purpose statement should be narrow and drawn directly from section 62.
2. Trustee consent and appointment mechanics do not meet SIS Act section 17A
Section 17A of the SIS Act governs the SMSF trustee structure. Either each member must be a trustee (or a director of the corporate trustee), or one individual may be both the sole member and the sole trustee. A deed that appoints a non-member as trustee without triggering the mandatory corporate structure fails this requirement.
The practical error shows up during trustee changes. A member dies, becomes permanently incapacitated, or simply resigns. If the deed provides no mechanism to appoint a replacement trustee within the six-month period under section 17A(4), the fund technically ceases to be an SMSF during that gap. Deeds from the 1990s and early 2000s frequently have no successor trustee provision at all.
3. The deed does not permit death benefit payment to a nominated dependant
The SIS Act and the fund's governing deed together determine how death benefit nominations operate in an SMSF. Unlike regulated retail and industry funds, the formal requirements in regulation 6.17A of the SIS Regulations do not apply to SMSFs — the High Court confirmed this in Hill v Zuda Pty Ltd (2022) 96 ALJR 765. Whether a nomination is binding, how long it remains in force, and whether it lapses after three years all depend entirely on the wording of the trust deed. A deed that is silent on binding death benefit nominations means trustees retain complete discretion over who receives the death benefit. That may be fine in some family structures, but for members who want certainty, a silent deed defeats the whole point of filing a nomination.
More critically, a deed that actively restricts the trustee from paying a death benefit to a dependant inconsistent with section 10's definition of "dependant" — which includes spouses, children, and persons in an interdependency relationship as defined by section 10A — can render the payment non-compliant. Members with financially dependent domestic partners frequently discover the fund's original deed used a pre-2008 definition of spouse that excluded same-sex and de facto partners now expressly covered under the Act.
4. Rollover and portability provisions do not track current SIS regulations
Regulation 6.34A of the SIS Regulations requires trustees to give effect to a rollover request within three business days. Many older deeds were drafted before the 2019 amendments that standardised electronic portability and SuperStream compliance. A deed that requires the trustee's discretion to approve a rollover, or that sets a 30-day processing window, conflicts with the mandatory three-day obligation.
The conflict matters because the deed governs the internal mechanics of the fund. If the deed allows something the regulations prohibit (or vice versa), trustees face a conundrum: comply with the deed and breach the regulations, or breach the deed and potentially expose themselves to civil claims from the member. The answer is always to update the deed to track the regulations — but many trustees do not do this after ATO rule changes take effect.
5. Australian residency requirements are not adequately maintained in the deed
Section 17A also requires the central management and control of the fund to be ordinarily in Australia, and section 17A(1) requires that active members who are not Australian residents hold fewer than 50% of the market value of the fund's assets. A deed that vests exclusive control in a single trustee — without any provision for substitution if that trustee temporarily relocates overseas — creates a residency trap.
The residency rules became sharper after the Treasury Laws Amendment (Fair and Sustainable Superannuation) Act 2016 narrowed the safe harbour for trustees travelling abroad. The deed should include a mechanism for a temporary alternative trustee or, for corporate trustees, a reserve director provision that activates when the sole resident director is overseas for more than two years. Deeds that were never updated after 2016 routinely lack this.
6. Investment strategy requirements are not embedded in the governance framework
Regulation 4.09 of the SIS Regulations requires trustees to formulate and implement an investment strategy and review it regularly. The deed does not need to contain the investment strategy itself — that is a separate document — but the deed must empower trustees to adopt and amend the strategy in writing. A deed that either restricts asset classes (for example, limiting investments to real property and cash only) or omits any reference to the investment strategy leaves no governance pathway for strategy updates.
Trustee decisions made outside the deed's authority framework carry no legal effect within the fund. If trustees resolve to hold an unlisted equity investment — a private company in a related industry, for example — and the deed contains no explicit power to hold unlisted securities, the ATO can treat the investment as an unauthorised act. The potential disqualification of the fund under section 120 of the SIS Act then follows.
How to fix a non-compliant deed
Deed amendments are generally made by a deed of variation, signed by the current trustee or corporate trustee directors, and do not require ASIC lodgement unless the trustee company itself is being changed. Under established trust law principles, a properly executed deed of variation takes effect from the date of execution — but it must be dated, correctly executed, and retained permanently in the fund's records alongside the original deed.
The update process is straightforward when trustees act before a compliance audit. A free SMSF trust deed template at forms-legal.com covers the current trustee structure requirements, includes the mandatory sole-purpose clause, death benefit nomination mechanics, and investment strategy authorisation framework.
Timing: when to update your deed
Update the deed immediately after any of these events: a member joins or exits, a trustee changes, a new investment class is added, a member turns 65 or reaches preservation age and draws a pension, the fund receives a rollover from another fund, or any SIS Act amendment takes effect that the deed does not yet reflect. The ATO's SMSF annual return (question 14) specifically asks whether the fund complied with the SIS Act. Answering yes while operating under a deficient deed creates a false declaration.
The six errors above share one cause: trustees set up the fund using a deed template that was adequate at the time and then did nothing as the law changed. Reviewing the deed every two to three years — even a 30-minute check against current SIS regulations — catches most of these issues before the ATO does.
Need the document itself? Download the free template →
This article is general information, not legal advice — see our accuracy & editorial policy. Confirm the cited law is current before relying on it.