Some practitioners have indicated they still do not have a complete understanding of the criteria determining whether an SMSF has disregarded small fund assets (DSFA) with regard to the exempt current pension income (ECPI) calculation method the fund is permitted to use.
Under the current rules, an SMSF will have DSFA and be restricted to using the proportionate method of calculating ECPI if at the prior 30 June a member was in retirement phase and had a total super balance of over $1.6 million.
During an Accurium technical webinar held today, in conjunction with Class, the question was asked if the dual criteria had to be satisfied by a single member for the SMSF to be caught by the DSFA provisions.
“In this test, yes, it [must be] the same member. So let’s say we’re looking at the 2020/21 year, [then] any member of the fund who was in the fund in 2021 we look back at the prior 30 June [to determine] if any of those members had a total super balance over $1.6 million and had a retirement-phase account,” Accurium SMSF technical services manager Melanie Dunn said.
“They need to have both to trigger the disregarded small fund asset provision for the SMSF for the following year.”
However, according to Dunn, the member’s status in determining whether an SMSF has DSFA does not need to be encased within a single fund.
“You also need to have the SMSF with a retirement-phase account in that relevant year, say the 2020/21 year, but it doesn’t need to be the same member,” she noted.
“So the member who triggered the test could have a retirement-phase balance in another super fund, [but] as long as the SMSF has [a member] in retirement phase in the relevant year [it will have DSFA].
“It doesn’t have to be the same person who triggered the disregarded small fund asset provision at the prior 30 June.”