When Does A Superannuation Fund Commence?

There are three elements necessary for the conclusion of any express trust in Australia (known colloquially as the “three certainties”):

• There must be certainty of intention to create the trust – usually (but not always) evidenced by a declaration of trust via a written and properly executed trust deed;
• Certainty of objects/beneficiaries – in the case of superannuation funds, that means that the deed specifies the fund is established for the benefit of members and their dependants; and
• Certainty of subject matter – that is, the assets which have been initially settled on the trust to confirm its establishment.

At law and in equity, all three are required before a valid trust comes into existence.  You can execute trust deeds or orally declare trusts all you like, but unless and until there is some subject matter (assets) settled on the trust, it does not exist.  Additionally, the courts have held that it is valid to orally declare a trust, with the specific rules of that trust being committed to writing at a later date.

For many years, it has been the ATO’s practice to accept either the date the trust was declared via its deed, or the date assets were first settled upon that trust as the establishment date for the purposes of its database records.  However, the ATO also acknowledges that the most correct date to use is the date when the first assets are settled upon the SMSF:  https://www.ato.gov.au/Super/Self-managed-super-funds/Setting-up/Create-the-trust-and-trust-deed/

The reason for the variation in administrative practice with SMSFs is that, unlike other express trusts where a nominal settlement sum (such as $10) is provided at time of execution of the documents, there is rarely a specific settlor in the case of superannuation funds.  The usual method of settlement being the first contribution/rollover made to the fund or, in the instant case, with the execution of a contract for the purchase of the property which created a “chose in action” in favour of the SMSF and therefore was its first asset.

So, to conclude – there is nothing unusual, nor inconsistent, in a superannuation fund having a deed with a date of execution or inception which differs from the date the fund first acquired its assets.  However, it is only upon the latter event that a complete and valid trust actually comes into existence.  While the ATO has for many years accepted either the deed date or the date assets were first settled on the trust as the establishment date for its database records (because in the vast majority of cases it is not a critical issue, from a compliance perspective, for the regulator), it does specify that the most correct date to use in the application for registration as being the date assets were first acquired.

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