#9553
Awan Hammad
Participant

    Hi Dawood

    A pension commencement letter / minute only needs to be signed when a pension commences. The ongoing requirement is then to obtain a letter confirming the amount of pension allocated to each member on an annual basis.

    My view is the paperwork required in relation to commencement of a pension is determined by the Trust Deed. If the Trust Deed’s requirements have not been complied with then arguably the pension has not been commenced. As a result the Fund would not be entitled to exempt current pension income.

    Not having pension commencement paperwork would arguably be a breach of SIS regulation 1.06 “meaning of pension” & SIS regulation 1.06(9A).

    The ATO states:

    “The auditor should obtain evidence that the fund has rules for pension payments as set out in SISR sub-regulation 1.06(9A) and that the fund complies with the rules (that is, payments are made at least annually and minimum required payment has actually been paid to the member during the year) by examining:

    • the trust deed
    • bank statements for payments
    • actuarial certificates, where relevant
    • member records evidencing pension payments
    • any amounts accrued as pension payments.”

    The ATO has guidance re pensions at:

    Funds: starting and stopping a pension
    Information that trustees need to consider when commencing or stopping a superannuation income 
    stream or pension from a self-managed super fund (SMSF).
    

    Also refer TR 2013/5 – Income tax: when a superannuation income stream commences and ceases

    https://www.ato.gov.au/law/view.htm?DocID=TXR/TR20135/NAT/ATO/00001&PiT=99991231235958

    Paragraph 12 states:

    “The commencement day may occur before the due date of the first payment, depending on the rules which govern the superannuation income stream, but the commencement day cannot precede the date of the member’s request or application. Further, the commencement day cannot occur prior to:

    • the day established as the commencement day in the terms and conditions agreed between the member and the trustee that will govern the superannuation income stream; or
    • in circumstances where a member or dependant beneficiary[12] becomes entitled to the superannuation income stream under the governing rules of the superannuation fund, the time at which the entitlement to start the income stream arises”

    Thanks

    SMSF AAA

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