Neglected to pay trust Settlor Sum during SMSF setup

Hello, Hoping for some advice on an error I have made.. I set up a SMSF around five years ago with a company as trustee for the fund. When setting up the bank account I neglected to deposit the $10 settlor sum. Instead, my initial deposit was a cheque from my old SuperFund. Is anyone able to help with what I should do to resolve this? Thanks

 

From the little I know it's the settlors deposit that actually establishes the trust.
And the settlor cannot be a beneficiary of the trust he establishes.
So the question is who owns the money from the superfund if those funds established the trust, as they cannot be a beneficiary of the trust.

 

You and the trustee should seek legal advice.

SMSFs usually wouldnt have a settled sum.
What do the trustee resolutions say? There is no need to deposit the settled sum, the trustee needs to hold it, and it can be added to later.

 

I don't think it has to necessarily be deposited, just exchanged.

And yeah, a lawyer is needed.

 

for a trust to exist there has to be property and the initial property is $10 usually. It has to be transferred from the settlor to the trustee to hold. this could be by handing it over, hand to hand.

But not all trusts have a settlor. Unit trusts can be established by paying a nominal sum for units. SMSFs can be established by transferring the member balance to the trustee.

 

Thanks.. I’ll need to check my documents regarding a settlor... The structure I have is a company as trustee for the fund. I was initially advised to make a $10 deposit into the trustee account which I forgot to do at the time. I’m pretty sure there are units split between myself and my partner.. 6 each. Again I’ll need to check that one.

 

SMSF deeds should never refer to several issues:
1. Employer sponsors. Its a good sign of a BAD deed
2. Settled sums
3. Onerous member application rules. Failure to follow the rules may invalidate the membership.
4. Mimic all the SIS Act and Regulations. If any laws change its costly and complex to address. General "permissive" clauses may be preferred. Most lenders will expect a more detailed permission for borrowings based on present SIS rules

Perhaps you are referring to the initial share capital for the trustee company ?. It may be held in cash. The entity probably will never have need to perform accounting especially if its a special purpose trustee company but its notional balance sheet may show a asset Cash on Hand debit $10 and Equity may include a $10 credit to Issued Shares. The company probably has no need whatsoever for a bank account. The suggestion it should be 12 may make sense to my view as it seems a typical number of share capital. I generally prefer 12 issued ordinary shares since its a number that is divisible by 6 (max members), 4, 3, 2 and 1. Each members typically may hold one or two shares each with each holding the same number. This is merely a voting rights matter. However SISA and common law generally adopts the view (subject to the deed and constitution which could override that eg where voting is based on a member balance perhaps) each member / trustee director has a equal involvement in decisions.

 

I have a question about settled sum in a discretionary (family) trust with a corporate trustee, in Victoria. The trust deed was signed electronically (docusign).

The trust was settled with $10 / deed signed about 1 month before the trust's bank account was opened. The $10 initial settled amount is supposed to be the trust's first asset right? I hear people attach the $10 to their trust deed. But I don't have a physical trust deed; just a $10 note.

Question: How do I get the $10 into a business bank account?

1. Ask the settlor to transfer to the trust's bank account. Settlor is my accountant and is not comfortable to transfer funds electronically. Even if they were comfortable, I don't think this is right; because the $10 is now property of the trust. This leads to option 2.
2. I (being a director for the corporate trustee, and a beneficiary) transfer $10 from my personal bank account to the trust's bank account. Why electronic? Because my bank doesn't accept cash deposits for Cash Management Accounts. This leads to option 3.
   
3. I open another bank bank account that accepts cash deposits, and then deposit that $10 to be the first transaction of the trust bank account.

Why do I want to get $10 into the bank account?
I don't want to hold on to physical cash. I wanted nothing physical for this trust, that's why the deed is electronically signed. I have $10 cash as there was no bank account the day the trust was "settled".

I don't want to be in a situation where it can be deemed that I "Neglected to pay the trust, the Settlor Sum"

 

Seek legal advice. If the settlor paid the settled sim in cash there may not be an issue.

 

Thanks Terry. Settled sum is currently in cash, but I'd really prefer to have an electronic record, in the bank account if possible. I didn't issue a receipt for the $10 as I was told it's not required because it will be in the bank account.

I can issue a receipt now if needed, but would an prefer electronic record so there is no doubt.

 

Has an auditor picked it up? Not really an issue if paid

 

Auditor hasn't picked it up. That's not really the issue right now. The main question is:
How do I get the $10 in cash, into a business bank account?

I assume it's "trust property" now (discretionary trust), so I should just be able to deposit the cash into the trust bank account. But would prefer if I could transfer from my personal account as the bank I'm with doesn't accept cash deposits for the Cash Management Account.

Want to avoid this:

So the main question is:
How do I get the $10 in cash, into a business bank account?

 

Not an issue but if you are really keen, open another trust account that does accept cash deposits and transfer from their

 

Technically speaking if you understand the tax ruling a settled sum makes the settlor a member if the tax ruling TR 2010/1 is read. Very illogical deed which could result in a smsf breach for a member not being a trustee and after 6 months is fatal as a breach. I would argue it shouldnt be picked up by an audit until the settlor deposits $10 and then they become a member with a interest. If there was property this could become a concern in NSW etc.

There is a trusted lawyer I would be asking for a solution. Grant Abbott or Tony Amouralis - of Lightyear docs.

 

Is grant abbot a solicitor?

 

Yes.

 

Tony tends to provide the legal practice support. Abbott & Mourly is a registered legal practice (QLD)

https://www.abbottmourly.com.au/lawyers

 

He doesn't hold a nsw practicing certificate.

 

I wouldnt expect he does. You may be a better point of knowledge but my understanding is a state law soc issues a state certificate but a Australian Practicing Cert covers interstate work issued by state council governs national work but can limit it. Any legal engagement is provided in QLD. I know he doesnt assist or support general conveyance etc so no NSW services are provided and I dont believe he does court matters involving nsw courts

Its all very confusing what a pract cert covers and its conditions
Categories of practising certificate | The Law Society of NSW

 

A person can be a lawyer which means qualified at some point to practice law. But to practice as a solicitor they need to hold a valid practicing certificate. I think is is not a solicitor but just employee of a law firm. If that is the case he couldn’t law or give legal advice if that is the case