Resolutions needed when doing recontribution strategy?

Take this example:

29th June the SMSF pays 100k pension to John. John recontributes a 100k non-concessional contribution back into the SMSF on 30th June. On 1st July the SMSF pays 100k pension to John. Again John contributes a 100k non-concessional contribution back into the SMSF on 2nd July. Then John starts a $200k pension with this new money on 2nd July.

Does a SMSF need to do resolutions when a recontribution strategy is done? If so, how many resolutions would need to be done for the above example?

1. I believe John needs to write a letter dated 2nd July to the SMSF requesting a $200k pension be started immediately on 2nd July.
2. The SMSF would immediately write back a letter dated 2nd July saying acknowledging & accepting a $200k pension be started.
3. A resolution would be done 2nd June stating a commencement of pension, the starting amount of $200k and mention the minimum payments based on age.

 

Why would a resolution assist? TR 2010/1 doesnt discuss resolutions being a factor to a contribution.

Pensions need a bit more than a resolution.

A pension commencement will be determined the the rules contained in the deed. What does it say ? Some deeds specific a form or method. Otherwise, then the paperwork and bank transfers will be most important since if they occur on different days then an actuarial issue occurs. A resolution also provides a record of a decision.

Just remember too about the need for the fund to determine the member allocations immediately prior to commencing a new pension. This way the correct tax elements are determined for the pension paid. The new $200K pension wont necessarily comprise only the new funds contributed. Depends. In some cases it can be easier to rollback (commute) and other pension and create a new single pension on the same date. And in some cases its important NOT to do this. And when the new pension starts is it reversionary ? This may need to be nominated on application and confirmed by the trustee. It may save some tax issues if a death occurs.

Note too the transfer balance reporting requirements.

We use smart software that integrates all of this into a single seamless approach. Old traditional methods or "paper record funds" may create a monster if this is ignored.

 

Trustees must record everything they do as a resolution. But there are other requirements too such as pension documentation, taxation requirements and corporations law to consider (if trustee is a company)

Read the deed.

 

Good functional trust deeds may also permit the trustee to make resolutions verbally. I dont believe there is any specific provision is SISA which says a trustee must record every resolution to do something. A resolution to deposit money to a bank account ? It may in fact be contrary to fact if one Director falsely records such a decision without unanimous agreement or in a way inconsistent with the company constitution / deed. Most deeds probably wont impose rigorous rules upon a trustee but some do eg Some (bad) smsf deeds require a trustee to calculate an earnings rate and resolve to distribute this and it may even fail aspects of the SIS Regs concerning "fair and reasonable" allocations...Thats almost impossible to do and is a bad clause.

A (dated) record of a resolution is often a better way to consider "resolutions". And I have reasons why "minutes" are a really bad idea especially for many trusts and smsfs. Minutes record what occurred at a meeting. Quite often this is a fiction where a resolution or record of a resolution isnt. It then cant be argued as defective. In AAT cases the question of when and how a resolution is made can pose a concern. Generally some mug accountant admits they drafted the minutes and provided them well after the event. However a record of earlier verbal resolution / decisions is far harder to attack.

Start with the deed and fund rules & company constitution . A good trust deed should be highly permissive to do anythiing consistent with trust, tax, smsf and general law (provided it is not illegal or prohibited) rather than a long list of what is permitted. Grant Abbott even ensures his deed includes authority for the trustee to do illegal & prohibited things - Why ? So it doesnt breach terms of the trust !!