SMSF trustees are required to document their decision in making a choice as to the method the fund uses to calculate exempt current pension income (ECPI) for the relevant financial year.
“If you do have a situation where you are eligible to make a choice [of which ECPI calculation method to use] and you do want to elect to treat fund assets as not being segregated current pension assets, the best approach we can think of to document it is to make sure you [record] a trustee minute so you have some documentation on hand to identify that was the choice made,” Accurium principal Melanie Dunn told attendees of a technical webinar held today.
“You need to treat your calculation of ECPI consistently with that choice and also the deductibility of expenses consistently with that choice.”
Accurium head of education Mark Ellem confirmed this is the most accepted way to make a record of this type of decision.
“There is no formal document, there is no form with a NAT number on it that you have to complete and lodge with the ATO,” Ellem noted.
He pointed out even though there is no obligation to document the fact the trustees decided not to exercise their ability to choose which ECPI calculation method to use even though they were eligible to do so, it was still sound practice to make a record of this course of action.
“[Even if the trustees don’t make a choice], it still might be worthwhile noting that the fund did have choice of how to calculate ECPI but chose not to choose to apply the proportionate method for the entire year,” he said.
“[It’s a matter of] dotting those i’s and crossing those t’s [as] that gives the auditor comfort the trustees made that decision and the tax has accordingly been calculated.”
Dunn acknowledged documenting the fact a choice of ECPI calculation method was not made would also be prudent to mitigate risk for advisers.
“[It will mean] you don’t get disappointed trustees come back and say why did I pay tax on [these items],” she said.
