The ATO will soon clarify its compliance stance on the segregated method for SMSF assets being used to fund a pension after it recently received a significant number of queries on the subject.
The flood of inquiries has come as a result of an earlier communique from the regulator stipulating an actuarial certificate would be required if the segregated method had not been used for an entire income year.
Speaking at the SMSF Association State Technical Conference in Sydney last week, ATO director in superannuation Mary Simmons said: “We did actually say that where you’ve got segregated assets and you haven’t been paying a pension for the entire year, that is, you’ve started a new pension part way through the year, then you couldn’t rely on the segregated method without an actuarial certificate.
“It’s caused a bit of confusion because some have interpreted that as meaning [the instruction] would automatically default you into having to use the unsegregated method to calculate your exempt current pension income.
“That wasn’t the intention of the statement. It was just to say [the assets] could still be segregated, because that’s a question of fact, it’s just that you would need to obtain an actuarial certificate because you weren’t paying superannuation pension benefits at all times during the year.”
As a result of the confusion created by the ATO’s initial statement covering these situations, it is now working with primary actuaries as well as other industry representatives to get a better understanding of how the segregated method is being applied practically when a pension has not been paid for a full income year.
“We expect to be able to offer you some clarity very shortly on that matter,” Simmons said.
“So we hope to be in a position where perhaps we can reflect more accurately what the industry has been doing because the industry hasn’t interpreted [our initial statement] in [the proper] manner.”
