Drastic ECPI rule change wanted

ECPI rules change

A large portion of practitioners have been found to favour a complete change to the rules for calculating exempt current pension income (ECPI).

A survey conducted by actuarial firm Accurium has found nearly one-third of practitioners would like to see a significant change to the rules governing the calculation of exempt current pension income (ECPI).

“Quite unexpected really from our perspective, the most popular option so far, 32 per cent of respondents, [has been] for the legislation to be changed to remove the ability for self-managed super funds to segregate assets all together,” Accurium general manager Doug McBirnie revealed during the company’s latest technical webinar.

“So removing the option for assets to be segregated to support a retirement-phase income stream.”

According to McBirnie, this preferred option could provide some real benefit to the sector.

“If that’s introduced with an exemption from the requirement to get an actuarial certificate where a fund is solely in retirement phase, so if it’s 100 per cent tax-exempt, that has a benefit of really simplifying the administration [of SMSFs]. [So] use one method for all funds, the proportionate method for all funds, and you [have to] get a certificate if the tax-exempt percentage is going to be less than 100 [per cent] and then you apply that to all the income,” he noted.

A mood of legislative fatigue was also reflected in the results, with the second largest group of participants, 28 per cent, indicating they did not want any more rule changes.

“We’ve got a decent proportion of you saying: ‘Actually, you know what, we’ve had enough with the changes. Let’s just leave it as is. We’ve had these [current rules] for three years now, we’re all across them, [so] leave them as they are,’” McBirnie said.

The survey also uncovered a potential misunderstanding of sector attitudes toward ECPI calculations, with only 21 per cent in favour of giving trustees the ability to choose which method to use, allowing them to benefit from the best tax outcome.

“Industry had kind of assumed that this was the [option] people wanted to see [introduced],” McBirnie noted.

A return to the pre-2017 method of ECPI calculation where deemed segregation only applies when a fund is 100 per cent in pension phase for the entire income year was least popular, with only 19 per cent of respondents leaning toward this outcome.

The study is in the field and Accurium is encouraging practitioners to continue expressing their views on this subject.

During the same webinar, it was confirmed SMSF trustees and practitioners are still having trouble with the disregarded small fund assets rule associated with ECPI calculations.

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