ECPI election likely to be end of year

ECPI elections

The SMSF Association has predicted the government will allow ECPI elections to take place at the end of an income year as it will make little difference to its received revenue.

The federal government and Treasury are likely to decide to allow SMSF trustees to make an exempt current pension income (ECPI) election at the end of a financial year, but may seek further industry input before doing so, according to the SMSF Association.

Association deputy chief executive and policy and education director Peter Burgess said while the government had pushed back changes to the ECPI calculation method to 1 July 2021, it had yet to decide when trustees would be required to calculate the amount of ECPI under those changes.

Burgess said the changes relate to how an SMSF could calculate ECPI on assets supporting a pension, with the options being to apply the ECPI percentage just to the income that has been derived from unsegregated assets or apply the ECPI percentage to all the income derived during the year.

“It is getting late into the financial year and we may see the government go straight to a bill with this change as they may consider it a straightforward change in legislation,” he said at the recent SMSF Association National Conference 2021.

“They may go to a consultation paper because they may want some feedback on how trustees should elect which option they will choose and should they be required to make the election as to which option they will use at the start of the income year or the end of the income year.

“In my opinion, they should be permitted to do it at the end of the income year, given it is unlikely the election needs to be lodged with anyone and it would be a difficult system to implement if they were required to make the election upfront.

“The other reason trustees should be allowed to do it at the end of the year is because I don’t think Treasury is particularly concerned by the revenue leakage here.

“When industry argued a few years ago to go back to the old way where the ECPI percentage applied to all the income, the argument then was that it did not matter that much which option was chosen, and hence the reason we will find trustees can make the election at the end of the year.”

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