While the ATO has not budged from its stance of requiring any SMSF entirely in pension phase to use the segregated method when claiming exempt current pension income (ECPI), it has confirmed its compliance activities will not be focused on adherence to this edict for the 2017 financial year or any prior periods.
It means SMSFs that have used the proportionate method to calculate ECPI, even when these funds were in 100 per cent pension phase, will not have to amend their calculations for 2016/17 returns, allowing them to concentrate on complying with the new rule only for future years.
Actuarial firm Accurium has welcomed the announcement, saying the regulator’s attitude has afforded the industry a proper transition period to comply with the new parameters.
“This means that the industry can continue with its current approach for all SMSFs completing their 2016/17 annual returns and we now have some time to make the necessary changes to systems and software to deal with the new methodology that will be required for 2017/18 onwards,” the organisation said in a blog on its website.
“It does mean that SMSF practitioners need to be aware that the decisions they and their clients are making now for the 2017/18 year will be treated under the new rules.”
However, Accurium warned advisers to be aware of the implications when clients wish to take up capital gains tax (CGT) relief provisions contained in the super reforms.
“It is worth noting that this concession from the ATO does not extend to which method funds need to use for CGT relief purposes,” the firm said.
“Where a fund is solely in pension phase on 9 November 2016 it must still use the segregated approach for claiming the CGT relief, even if the trustee opts to use the proportionate method for ECPI purposes.”
Confirmation of the ATO’s position on this issue is expected to be officially announced on its website in the coming days.