Advisers must note asset segregation rules

Advisers need to be aware of the two dimensional nature of the asset segregation rules to understand this type of arrangement can still exist in an SMSF even after the implementation on 1 July of the new legislation governing the superannuation system, an industry educator has said.

“Asset segregation is one of two things. Firstly, it’s an investment strategy decision by the members of the fund and that is member one says ‘I really like these shares, I want them to be my shares’,” Miller Super Solutions founder Tim Miller told the Super Reforms Masterclass in Sydney yesterday.

“We know in reality they can’t be the member’s shares, they belong to the super fund, so they’re held on trust, and that the income is generated back to the superannuation fund, but you can have member-directed investment strategies inside self-managed super funds.

“But segregation also means something else and that is it is the way we calculate the exempt current pension income (ECPI) deduction for funds that are paying a pension.”

Miller pointed out the significant changes to the asset segregation rules from 1 July only applied to the calculation of ECPI and the rules governing the segregation of assets for investment strategy would remain the same.

“What we’re talking about is tax reform and not super reform. So the ECPI is taxation related, whereas investment strategy is super law,” he noted.

Miller said advisers should realise they would still be fielding requests from clients to have particular assets attributed to them to support their individual retirement savings needs and as such should know how to manage those requests.

“You can still do that and you can still have the income attributable to that particular member. It’s just that when we do the tax calculations we’re putting all of the assets of the fund into one pool as such to do our ECPI calculation,” he said.

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