Actuaries may aid ECPI choice

actuaries ECPI method

Actuaries are looking to help determine whether to use segregated or proportionate method to calculate ECPI under the new legislation governing this area.

The actuarial community is intending to liaise with clients and the greater SMSF sector to determine the role it can potentially play in assisting the decision-making process regarding the choice of method to be used in the calculation of a fund’s exempt current pension income (ECPI), a technical specialist has revealed.

Under draft legislation released last Friday, SMSF trustees will have a choice as to whether they use the proportionate method for the entire financial year to calculate ECPI or use a combination of the segregated and proportionate methods if the fund has both accumulation and pension interests at different times of the 12-month period.

Speaking at the SMSFPD Digital 2021 event hosted by selfmanagedsuper this week, Accurium SMSF technical services manager Melanie Dunn said: “We [recognise] there will be some situations where a fund would prefer to do a comparison and will need to do a comparison to identify [whether] segregating assets or not in different periods of the year will provide the optimal tax outcome.

“So we will be looking to develop ways to make this as easy as possible for our clients.”

With regard to the process itself, Dunn acknowledged this could mean making multiple ECPI calculations to allow advisers and their SMSF clients to understand which method will deliver the best outcome.

She pointed out the final draft of the legislation will determine the extent to which Accurium can play a part in this calculation comparison.

“I think it’s a case of ‘watch this space’ here. As we [better] understand how the legislation will be enacted, we will be able to improve our processes and work with the software platforms to implement ways to help you make that choice for those clients where a comparison is required.”

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