Unsegregated funds requiring an actuarial certificate as part of their end-of-financial-year reporting should be aware of the common errors made by trustees when completing the application form, according to an actuarial services provider.
In a blog post on its website, Accurium stated the actuarial certificate application process, which would determine whether or not an unsegregated SMSF had exempt current pension income (ECPI) during the financial year, contained potential stumbling blocks for trustees.
Pointing to the ‘Fund details’ section of the form, the firm said: “The most common issue we see at this point is clients choosing whether the fund is eligible to use the segregated method or not.
“Essentially, this is whether the fund had disregarded small fund assets. Whether a fund had disregarded small fund assets or not can change how the fund will need to claim ECPI, so it is very important to get this right.”
The service provider cited the ‘Internal transfers’ section of the application form as another area of confusion and said the figure entered in the ‘Amount left over’ box should be the total amount still left in the account after the internal transfer had occurred.
“An example of this is a member with three different pension accounts commuting one of the accounts back to accumulation phase. In this type of situation, we sometimes see clients entering $0, but this is not correct,” it added.
“The commutation amount will be the value of the pension account being commuted. The amount remaining will be the value of the remaining two pension accounts which have not been commuted.”
It also highlighted the transaction details entered on the form should show the actual dates of when the transactions occurred.
“Occasionally we see clients enter the dates of contributions and other transactions as 1 July or 30 June,” it noted.
“Our calculation is a daily weighted average and, as such, the timing of the transactions impacts the exempt income proportion.”
Recently, Accurium SMSF technical services manager Melanie Dunn said the timing of a fund transaction was critical to maximising the amount of ECPI that could be claimed by trustees.