What are the rules about varying the governing rules of my super fund?

In Plain English

The rules for changing the governing rules of your super fund depend on the type of fund you have. Generally, the trustee of the fund must consent to any changes. However, there are exceptions, particularly for employer-sponsored funds where changes related to employer contributions or fund termination may not require trustee consent. Certain alterations, especially those negatively affecting beneficiaries' rights, require specific notices and consent procedures. Additionally, there are specific rules for self-managed super funds (SMSFs) and funds with fewer than 5 members.

Detailed Explanation

The Superannuation Industry (Supervision) Act 1993 and the Superannuation Industry (Supervision) Regulations 1994 outline the rules regarding the amendment of governing rules for superannuation entities.

General Requirements:

  • Trustee Consent: Generally, the governing rules of a superannuation entity (other than a self-managed superannuation fund) must not permit those rules to be amended unless the trustee, or the trustees, of the entity have consented to the amendment (subsection 60(1) of the Superannuation Industry (Supervision) Act 1993).
  • Employer-Sponsored Funds: There are exceptions for employer-sponsored funds, where amendments related to employer contributions or the termination of the fund may not require trustee consent (subsection 60(1) of the Superannuation Industry (Supervision) Act 1993).
  • Specific Circumstances for Amendment: Regulation 4.05 prescribes circumstances in which the governing rules of a superannuation entity other than a self managed superannuation fund may be amended. These circumstances include ensuring the fund's solvency and compliance with relevant legislation. Amendments can also relate to non-mandated employer contributions, admission of new members, or termination of the fund.

Beneficiary Protection:

  • Adverse Alterations: Regulation 4.04 outlines specific rules to protect beneficiaries when alterations to the fund's governing rules could adversely affect their rights or claims to accrued benefits.
    • The trustee must provide a notice to the beneficiary explaining the proposed alteration and its effect on their benefits.
    • The beneficiary must be given adequate time to consider the proposed alteration.
    • Consent from the beneficiary is required for the alteration to proceed.
    • Similar protections apply to non-member spouses in cases involving payment splits.

Self-Managed Superannuation Funds (SMSFs):

  • The Superannuation Industry (Supervision) Act 1993 includes specific provisions for SMSFs, as defined in section 17A. These funds have fewer than 5 members, and specific conditions apply regarding trustees, directors, and employment relationships among members.

Funds with Fewer Than 5 Members:

  • Section 121A of the Superannuation Industry (Supervision) Act 1993 states that a person must not be, or act as, a trustee of a superannuation entity that is a superannuation fund with fewer than 5 members (other than a self managed superannuation fund) unless the person is an approved trustee.

Invalid Amendments:

  • Subsection 60(3) of the Superannuation Industry (Supervision) Act 1993 states that if the governing rules of the superannuation entity are inconsistent with subsection 60(1) or (2), the subsection concerned prevails, and the governing rules are, to the extent of the inconsistency, invalid.