“It’s not just what your trust deed says, if it’s silent on particular issues, then there are certain presumptions that apply to trustees of trusts and superannuation funds including SMSFs,” he explained.

“They’re just a special type of trust that has certain tax rules applied, and has certain covenants and other things that are read in, but they are a trust, and because of that, there are general law duties that apply to the trustee, unless they’re excluded by the deed.”

Under tax law, for example, trustees generally have to invest the trust property as a prudent person would, or essentially as a prudent business person would, and they have to do that in the best financial interests of the beneficiaries.

“There’s an issue around what this means. It’s broadly construed the modern portfolio theory of investing, so having one major real estate investment would not be consistent with that for example,” he said.

“Even if you had an investment strategy that supported that, if your deed didn’t say that you’re allowed to have undiversified investments, these are still general obligations.”

There can also be other limitations in dealing with real estate, he said.

“If you’ve got a piece of real estate for example, the trustee has a duty to rent the property, it has to receive rents for it on an ongoing basis, it can’t be left untenanted,” he explained.

“We sometimes see land banking in superannuation, primarily in an SMSF context, whether that’s in the context of long-term capital gain appreciation, or some type of development that’s happening over a period of time, so there’s plenty of times where SMSFs don’t have the trust property tenanted and that wouldn’t be permitted if your trust deed was silent on it,” he warned.

There can also be limitations on carrying on a business and holding assets in the name of another entity other than the trustee, if the trust deed is silent on those issues.

“So this means that there are general trust law duties that we need to factor in,” he said.

“In most cases a well-drafted deed is going to displace those requirements and remove them from being applied in an SMSF context, because they’re not desirable or they don’t provide enough flexibility.”