SMSF trustees will have a choice as to how they calculate their exempt current pension income (ECPI) after legislation creating that situation received royal assent yesterday.
The Treasury Laws Amendment (Enhancing Superannuation Outcomes for Australians and Helping Australian Businesses Invest) Bill 2021, which passed through parliament on 10 February, after first entering in late October 2021, will now take effect from 1 April.
Under the changes in the bill, superannuation trustees, including SMSF trustees, that hold all fund assets in retirement phase for part, but not all, of the income year can treat the assets as not being segregated current pension assets for that period, the ATO stated in an update on its website.
“Funds who make this choice will be able to use the proportionate method for calculating ECPI,” the regulator said.
“Previously, trustees were required to use the segregated method when a fund was fully in retirement phase at any time of the income year.
“When a fund had members in both retirement phase and accumulation phase for part of the income year, and only retirement phase for another part of the income year, trustees may have been required to use both the proportionate and segregated methods to calculate ECPI.”
It pointed out the new law will allow trustees in these circumstances to treat their assets as not being segregated current pension assets and they can use the proportionate method when calculating all of their ECPI for the income year.
“This change does not affect funds that only pay retirement-phase pensions and only have segregated current pension assets at all times in an income year. Such funds will be required to continue to use the segregated method to calculate ECPI,” it said.
“The change also does not affect funds with disregarded small fund assets, who will be required to continue to use the proportionate method to calculate the fund’s ECPI.”
The new calculation method will apply to assessments for the 2021/22 and future income years.
