Bushfires spotlight documentation issues

Bushfires SMSF documentation

Actions to remedy lost or destroyed SMSF documentation have come to the fore as a result of the recent bushfires and floods across the nation, according to a technical expert.

The recent bushfires and floods across the country have highlighted the courses of action available if SMSF documentation, such as that associated with a pension, has been destroyed as a result of a natural disaster or any other circumstance, a technical expert has said.

“If pension documents are missing, [so if] you literally can’t find them or in this instance they’ve been lost through fire or flood or whatever, we actually state that we do have a pension and we’re able to evidence that through a series of events that we can validate and therefore affirm and confirm that a pension is afoot, and then create a replacement set of pension rules that obviously follow the deed as well,” Smarter SMSF chief executive Aaron Dunn said during his latest technical webinar co-hosted by law firm Holley Nethercoate.

Dunn noted loss of pension documentation did not mean the existing income stream needed to be commuted and restarted as this course of action could have some unintended implications.

“There are some technical implications of doing that … in particular if your clients have been receiving Centrelink benefits for a long period of time and it pre-dates January 2015, or if they’ve had some transfer balance cap issues that they needed to remedy at 30 June 2017,” he said.

He pointed out the process of establishing there was a pension in place did not mean it was essential to recreate all of the rules governing the income stream before the documentation was misplaced or destroyed.

“The problem is you don’t necessarily know all the rules. [For example] you might not know if [the pension] was reversionary or not. What you do know and you evidence is you know the client has taken the minimum [drawdown] every year, you know the client has reported [the pension] for transfer balance cap purposes, you know that [the fund] got an actuary’s certificate every year,” he noted.

“So for all intents and purposes [we are establishing] we actually have an income stream afoot. We’re confirming by that evidence as a deed of affirmation and confirmation that we do have a pension and then we are creating a substitute or replacement set of documents to be able to support the fact we do have a pension.

“In that process you will confirm if you do have a reversionary [instruction in place] or you don’t have a reversionary [instruction] so that that carries on and doesn’t have to go through a process of potentially commutation and repurchase.”

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