Advisers can formulate the comparisons between exempt current pension income (ECPI) calculation methods, but it is SMSF trustees who must make the choice as to which method the fund will use, a technical expert has said.
Speaking at the Institute of Public Accountants National Congress 2022 held on the Gold Coast today, Accurium head of education Mark Ellem told delegates: “You may be able to provide advice to your clients saying your fund has a choice [of ECPI calculation method and] if it does make a choice, here is the tax outcome, [and] if it doesn’t make a choice, here’s the tax outcome.
“[The client will then be able to determine] which one gives them the better tax outcome or which one gives them the lower tax bill or which one gives them the greater tax refund. But it needs to be the trustee’s choice.”
Providing an ECPI calculation method comparison to clients will also give rise to practice management issues for accountants and financial planners, Ellem warned.
“So [you recognise] there might be some significant lumpy income [in the fund and declare] I’m going to do a comparison,” he said.
“[You have to determine] how do I do it and secondly are you going to charge for it. If this is value for your client and you’re doing extra work, what’s your fee arrangement with your client [regarding this service]?” he said.
“Is it a set fee? Is it time costed? [These will be] practice [management] questions [needing to be answered].”
He also reminded practitioners how this choice must be communicated.
“That is not an election [where you] tick a box on the SMSF annual return [and] there is no NAT form for it to be lodged with the ATO. But you will need to have a record of it and the best way to do it [is through] a trustee resolution,” he suggested.
