Comments

  1. Abhitha Pathy says:

    Aaron,

    What documents do you think a Trustee should have in place for each ABP or TRIS that is commenced in a SMSF?

    My practice uses Pension Kits prepared by a specialist legal practice and they cost $550 per pension. I have worked in other practices, where the documents are simply made up of a pension request to the trustee, outlining all the pertinent information, an acceptance letter by the trustee and duly noted Minutes.

    Is there a middle ground?

    Thank You

    • Hi Abhitha,

      For any commencement of an income stream from an SMSF there needs to be a paper trail of the decisions of the:

      * Product Disclosure Statement (PDS) – this should be within the fund’s trust deed
      * member’s request to commence a pension,
      * respective trustee minutes (or resolutions) regarding the commencement; and
      * notification back to the member regarding of the pension commencing.

      Whilst many legal firms provide documentation to commence a pension, it is simply documentation only. Pension documents are not legal documents and can therefore be prepared by a trustee or other service provider.

      It is important that the commencement is referenced back to the provisions contained within the deed, so solicitors would obviously have an understanding or their deed clauses. However, any specialist SMSF adviser should have sufficient skills to navigate around a fund’s trust deed.

      The trustee resolutions should have regard to:
      * trust deed clause to pay the pension
      * satisfied pension has met a condition of release (and cashing condition)
      * what type of pension is being paid
      * creation of a separate superannuation interest
      * determine tax-free proportion
      * regulatory requirements (if any) e.g. PAYG withholding registration

      Whichever you decide to go with this, I don’t feel that you have a problem.

      Regards,
      Aaron

  2. Hi Aaron
    Am I correct is saying that the annual minimum payments on Account based pensions must be made annually for the superfund to be entitled to zero tax on segregated asset income? If you were $1 short would you lose this tax advantage?
    Are all superfunds now using this “Account based pension” for this tax advantage and is it true that that people who have retired can take more than this minimum but must still take the minimum to get the zero tax advatage?

    • Hi Andy,

      Yes the minimum pension must be paid for the fund to quality for the tax exemption. Failure to not take the minimum (even $1 short), will mean that the fund has never paid a pension to the member at all during the financial year – all amounts withdrawn will be lump sums and the fund denied any tax exemption. This view is expressed in draft ATO tax ruling, TR2011/D3 – when a pension commences and ceases.

      Regards,
      Aaron

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