SMSF accountants and advisers should still examine if the use of both methods of calculating exempt current pension income (ECPI) will be beneficial for clients who hold retirement assets for only part of an income year.
Deloitte superannuation, SMSF and retirement savings partner Liz Westover said despite changes passing through parliament that would allow the use of the proportionate method for calculating ECPI, events in SMSFs may still require the use of both methods after the measures come into effect.
“These measures will apply from 2 July 2021, but, to be clear, they apply to measures for assessments for the 2022 financial year and future income years so we won’t really be using this methodology until we start preparing accounts for that year,” Westover said at the recent Tax Institute Superannuation Intensive event.
“A couple of things to think about if you’re doing that is it may sound administratively easier to get an actuarial certificate and to use the proportionate method for the whole year, and in doing so you may actually be doing your client a disservice.
“It could be that you are actually going to have to go and apply both methods anyway to see what is going to give the best outcome for clients.
“Depending on timing, contributions, the sale of assets and so on, you may actually still be better off using both methods in the one year rather than just getting an actuarial certificate for the whole year.
“Be really careful about this because it does raise some planning opportunities around timing.
“That’s the beauty of SMSFs – we have a lot more control and flexibility around timing of transactions and commencement of pensions and all sorts of wonderful things which give rise to planning opportunities that you can look at.