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Michael Rice

Jan 17, 2023

Market linked pension, with 3 years left, assets transferred out in specie

in SMSF Technical Forum

Hi All

We have a fund with a market linked pension with 3 years to run.

The advisor decided the fund was no longer economical so had all the assets transferred out in-specie in October.

Our thoughts thus far are Reg 5.08 and Reg 6.17 being breached.

We think the remedy, so far as it relates to the market linked pension, would be to treat the pay out as a loan and transfer the assets back. That would be a breach of s65 - prohibition of loans.

If the client goes with the loan we would also qualify under s109 - investments maintained on arm's length terms and Reg4.09 compliance with investment strategy.

Part A would be a clean opinion.

Do you have any thoughts on remedy and the audit breaches that will follow?

2 answers0 replies

Comments (2)

THE AUDITORS INSTITUTE

Jan 17, 2023

Hi Michael

Thanks & have not come across this issue before.

It may be worth the trustees / tax agent applying to the ATO to allow the benefits to have been paid out early. (Preferably done before the assets are transferred out)

I would also get the tax agent to raise the issue with their actuary that they use as they may have come across this issue.

Yes I agree a breach of SIS Reg 5.08 (minimum benefits not maintained) & Reg 6.17 (benefits not paid out in accordance with the Regulations).

There would also be a breach of Sub Reg 1.06(9A) (pension not paid annually & in accordance with the Regulations).

Yes re the loan to rectify the breach I agree with the sections that you intend to qualify on (section 65 - loans to member / section 109 - arm's length investments / Reg 4.09 - investment strategy).

If a loan I would also qualify on sections 82 - 85 of SIS re a breach of the in-house asset rules.

Yes I agree no qualification in Part A of the audit report.

Thanks

SMSF AAA

Michael Rice

Jan 17, 2023

Replying to

Thank you