The ATO has published a document on their website with frequently asked questions relating to the recent superannuation changes (most of which started on 1 July 2017). Below are some of those questions which provide important guidance regarding the calculation of exempt current pension income (ECPI) for the 2017 income year.
How do I calculate ECPI where the fund switches to the proportionate method prior to 30 June 2017?
In this case, for a period of the year, the fund will have been segregated, and for the remainder of the year it will be unsegregated. The fund can exempt income under the segregated method for the first period and under the ‘proportionate method’ for the remainder of the financial year (when the fund was unsegregated). Please note that to calculate ECPI under the proportionate method, an actuarial certificate is required. This may influence the decision of a fund to choose to claim ECPI for that period.
I am the trustee of a fund which is switching from the segregated method to the proportionate method for calculating ECPI before 1 July 2017. Do I need to obtain an actuarial certificate for 2016/17 if I am only using the proportionate method for a short period?
An SMSF trustee does not have a regulatory obligation to obtain an actuarial certificate. An actuarial certificate is an income tax requirement to support a claim for ECPI for the period in question. Many funds will switch from the segregated to proportionate method in preparation for the super changes and for some funds this means that they will only be using the proportionate method for a very short period of time in this financial year. You should determine if your fund has any income in that period. If it does you should consider whether the cost of obtaining a certificate outweighs the benefit of exempting part of that period’s income. You may decide not to claim ECPI on that income, in which case you will not be required to obtain an actuarial certificate.
My SMSF is currently ‘fully in pension phase’ and deemed to be using the segregated method. My SMSF will cease to be segregated for only one or two days at the end of 2016/17 when I commute amounts to comply with the transfer balance cap. I intend to obtain an actuarial certificate to claim ECPI for income on those days. Can I rely on an actuarial certificate that is provided for the entire income year, from 1 July 2016 to 30 June 2017?
Where an SMSF that is ‘fully in pension phase’ moves from being deemed to be segregated to unsegregated for part of the 2017 income year as a result of a member (or members) commuting amounts back to accumulation phase to comply with the transfer balance cap before 1 July 2017, we will not seek to apply compliance resources to reviewing the actuarial calculation where the actuarial certificate obtained by an SMSF is for the entire income year, instead of the shorter period within that income year that the SMSF was unsegregated. That is, provided the relevant actuarial certificate includes the relevant period that the SMSF is unsegregated the SMSF can rely on an actuarial certificate. Note that this approach does not remove the need for an SMSF trustee to obtain an actuarial certificate if they wish to claim ECPI in relation to the period that the SMSF was unsegregated.