The ATO has confirmed its position on the requirement for actuarial certificates to claim exempt current pension income (ECPI) when an SMSF switches from using the segregated and unsegregated asset method at different time during a financial year.
To this end, the regulator has indicated a separate actuarial certificate will be required for each instance across a financial year where an SMSF reverts from using the segregated method to the unsegregated method to determine the fund’s ECPI.
“It means we can no longer rely on one single actuarial certificate for the whole year where we’ve had a fund change from the segregated method to the unsegregated method,” SMSF Association head of policy Jordan George said.
“Generally the approach has been in the past we had an accepted view that if you were switching in and out of segregated and unsegregated methods, you could potentially use a single actuarial certificate for the whole year to save on compliance costs, but the ATO does not accept this as an appropriate practice any longer.”
George said an SMSF beginning the year entirely in pension phase that accepted one contribution during in the year, that was converted into a pension, and then had a second contribution enter the fund later that year would be a situation where a fund would be switching at least twice from the segregated to the unsegregated method to calculate its ECPI.
“So where we have those unsegregated periods we may need to get actuarial certificates for those two periods, while we need to use the segregated pension method to calculate ECPI for the periods when the fund was 100 per cent in pension phase,” he said.
“That obviously brings in additional complexity for those periods where we are actually tracking valuations, contributions and pensions to be able to have the information required to go and get an actuarial certificate.”
