The final regulations pertaining to the Division 296 tax have clarified when an SMSF with only one member is required to obtain an attribution percentage certificate from an actuary regarding fund income.
“In relation to exemptions, initially [in the draft regulations], if you’re a single individual member, so if you’re a sole-member fund, you didn’t need to get an attribution percentage because [the earnings were] all allocated to [that one person],” Accurium head of SMSF education Mark Ellem told attendees of a technical webinar held last week.
“Or if your Division 296 fund earnings are nil, [you were also not required to get an attribution percentage calculated]. So if you’ve got no Division 296 fund earnings, you don’t need to go get an attribution percentage.”
However, Ellem pointed out the final regulations are slightly different as a result of the consultation process the government held.
During this consultation, he raised a set of circumstances where the drafted exemption regarding the need for an attribution percentage calculation was potentially inadequate.
“What if that sole member has a defined benefit pension which uses different rules [with regard to the treatment of Division 296 earnings]? How are they going to work out how much belongs to each interest?” he asked.
He acknowledged the final regulations were changed to accommodate this situation.
“So they’ve changed the final version to say that you don’t need an attribution actuarial certificate where there is a single member of the fund, there was only that single member of the fund for the entire year and they don’t have any defined benefit pensions,” he said.
“But as soon as you throw in the defined benefit pension, you need the attribution percentage.”
Further, he indicated another exemption element exists that was detailed in the explanatory statement to the regulations and not the regulations themselves.
“[There it stipulates in the case of] a small super fund, so an SMSF, and [the fund has] no members in scope for Division 296, you also don’t have to get [an attribution] certificate,” he explained.
Darin Tyson-Chan
Editor
Darin is the founder and publisher of Benchmark Media, an independent publishing house whose mastheads include financialobserver, selfmanagedsuper and smstrusteenews. He has been covering the financial services space for over a decade and in this time he has worked for a variety of trade publications. Darin has also written for the Money section published in The Sydney Morning Herald and The Age.
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