An SMSF technical specialist has reminded practitioners of the need for trustees to include the segregation of assets in their investment strategy if they are implementing that practice to calculate exempt current pension income (ECPI) for the fund and some members are in accumulation phase.
Accurium senior SMSF educator Anthony Cullen explained this is mainly to differentiate between the portfolio allocations in place.
“If you are segregating assets that form part of the investment strategy the trustees are taking, it might be because you have parents and children in the fund, so parents in retirement phase might be a little bit more conservative, but children who have got a lot of years to go before retirement can [take on more risk] with their investments [with an allocation to] cryptocurrencies, for example. And so that investment strategy should factor all of that in,” Cullen told attendees of a technical webinar hosted by Accurium today.
“So you want to build into your investment strategy that you are segregating particular assets that you really should be able to identify.”
He pointed out it is a process requiring advanced planning, but can be reviewed every year and should be documented by way of a fund minute.
“It’s not something you can [examine] at the end of the financial year and [say:] ‘Well how did the year go and can we make it look better by segregating [assets] retrospectively,’” he said.
According to Cullen, it would be even more prudent from a compliance perspective if the trustees or their administrators included supporting details of their choice to segregate assets in the SMSF’s financial accounts.
“It’s always a good idea to set up your software programs to be able to identify those [segregated] assets as well,” he suggested.
“This could be just a little indicator [in the fund’s financial statements] to identify which pool those assets belong to.”
