Actuarial concerns over segregated method

The Institute of Actuaries has expressed its concerns regarding the ATO’s approach toward the use of the segregated method within an SMSF when determining assets that have been used to support an income stream or streams.

Specifically, the professional body is worried about the ATO’s views on when the segregated method must be used and when the unsegregated method must be used and how it is done.

Angst over this issue has prompted the forwarding of written submissions to the regulator on this subject.

“It’s very early days, but there are submissions going to the tax office around that that the Institute of Actuaries are doing and we are doing as an association as well in order to get a discussion happening,” SMSF Association head of technical Peter Hogan revealed at the body’s recent Sydney Local Community breakfast.

“The Institute of Actuaries and a number of the major actuary providers have raised some concerns around the costs of providing actuarial certificates given the ATO view about the different methods that need to be accommodated.”

According to Hogan, one circumstance that has been highlighted as a potential problem is where a fund has been fully segregated for part of the year and unsegregated for part of the year.

He pointed out this situation and the problems it raises could manifest as early as the 2017 financial year from a practical perspective.

“These are the sort of things we’re trying to work through at the moment, but there is an issue around that you’ll hear some more about,” he said.

He added there was no further detail to share currently as the ATO has not yet been made aware of the issues causing concern, but he confirmed the Institute of Actuaries had asked the SMSF Association to initiate communications with the regulator now.

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