If after reading this article you have any ongoing concerns about the topic, please call us on 1300 307 343 — we will arrange for you speak about them with Julian Smith, Partner, at Maddocks.
Several of Cleardocs customers have asked it to comment on an article by Macquarie Group Services (which is not connected to Macquarie Bank) comparing various SMSF deeds. The article discusses SMSF deeds relying on deeming clauses to pay tax free pensions.
Cleardocs has read the Macquarie Group Services newsletter and email with interest, and discussed it with our lawyers at Maddocks.
The MGS article refers to the recent ATO Taxpayer Alert TA 2010/2 which deals with SMSF deeds which try to circumvent excess contributions tax.
Cleardocs and Maddocks published a ClearLaw article on this topic back in April (which you can view here).
The ClearLaw article confirmed that the Cleardocs SMSF deed does not contain the ineffective arrangements the ATO was discussing.
MGS's correspondence is clearly designed primarily to prompt SMSF advisors and trustees to seek MGS's assistance — but Cleardocs (and Maddocks) disagrees with it's basis for doing so.
Our SMSF documents are compliant, and reflect best industry practice.
The Cleardocs SMSF deed permits the relevant fund to pay any type of pension permissible under superannuation law. It does not repeat the relevant legislative provisions.
When the pension is payable, the trustee and member have to decide what pension will be paid and on what terms.
For this purpose, Cleardocs provides an SMSF Pension Pack. In that pack, the Pension Payment Agreement contains all express provisions required by superannuation law for paying a complying (tax free) pension. The Agreement doesn't rely on deeming clauses — just as MGS suggests it shouldn't.
What's more, all Cleardocs documents are clear, simple and easy to use — with all the master documents signed-off by leading Australian law firm, Maddocks.
If you use the Cleardocs SMSF deed and Pension Pack, then the MGS article doesn't raise any issues for you (nor for many other people).
But if you're interested, Maddocks has set out it's summary of the 'issue' MGS is discussing —with some general comments about how pensions, deeds and superannuation law fit together generally.
MGS refer to the recent ATO Taxpayer Alert TA 2010/2 which deals with SMSF deeds which try to circumvent excess contributions tax.
Cleardocs and Maddocks published a ClearLaw article on this back in April (which you can view here) which, by the way, confirmed that the Cleardocs SMSF deed does not contain the ineffective arrangements the ATO was discussing.
The deeming clauses the ATO discuss in the Alert, and those which MGS discuss in its newsletter, are very different.
The ATO discusses deeming clauses which try to say the facts are different from how they actually are. MGS discusses deeming clauses which incorporate legislative provisions lists a SMSF deed.
The ATO's alert discusses clauses which try to change the facts (the ATO doesn't call them 'deeming clauses', but let's call them that for now). The ATO's example is:
What the ATO is saying is that the excess contributions were, in fact, received into the SMSF, deliberately, as a contribution. And the ATO's view is that the clauses in the SMSF deed can't change that fact by cleverly creating a separate trust retrospectively.
MGS identifies two types of deeming clauses — but neither of which you would usually rely on to pay a pension:
MGS is really talking about deeming clauses which:
We don't think so. Here's why:
That said, our view is that documenting a pension without a pension payment agreement is not best practice, because it doesn't deal with a whole lot of other matters — for example: pension instalments, payment of reversionary pensions, etc.
As always, you need to get legal, accounting and tax advice about how best to plan your retirement incomes — understanding how your SMSF's rules work is one part of that planning.
For more information contact Maddocks on 03 9288 0555 and ask for a member of the Cleardocs Help Desk.
Paul is a Senior Associate in the Maddocks Commercial team with particular expertise in commercial agreements for the supply of goods and/or services, the Personal Property Securities Act 2009, the National Consumer Credit Protection Act 2009 and the National Credit Code and the Australian Consumer Law.
Paul's key areas of practice include:
Before joining Maddocks, Paul was employed for 13 years with the Victorian Department of Justice, principally as a Deputy Registrar in the Victorian Magistrate's Court, but also as a legislation, policy and project officer for the Department.
The legal information and commentary on this site is general only. Documents ordered through Cleardocs affect the user's legal rights and liabilities. To assess their suitability for the user, legal accounting and financial advice must be obtained.
For more information, contact Maddocks on (03) 9258 3555 and ask to speak to a member of their team.