Accurium clarifies common area of confusion with segregated method
SMSF services provider Accurium has provided an explanation on whether an SMSF can use the segregated method where a fund that’s solely in retirement phase receives a contribution.
In a live Q&A webinar, Accurium technical services manager Melanie Dunn said that one of the common questions she receives is if a fund will still be segregated for the whole year where the fund is 100 per cent in pension mode and receives a contribution that is immediately put into the retirement phase.
The first thing that needs to be confirmed, explained Ms Dunn, is that the fund is solely in retirement phase over an entire income year so that it is 100 per cent exempt from an exempt current pension income perspective.
“Where you have received a contribution and that contribution comes in, it does come into the fund as an accumulation interest,” said Ms Dunn.
“However, if that is immediately put into pension mode so that the fund remains entirely in the retirement phase for the income year, whether that contribution impacts the ability to claim ECPI using the segregated method, the ATO has said is a matter of documentation.”
Ms Dunn said the trustee needs to show that there was no time for any income to be earned in the accumulation phase.
This could be in the form of a minute, she said, which states that the contribution has come in and was immediately converted to a retirement phase income stream.
“That would be sufficient to identify that there was no time for any income to be earned in the accumulation phase and the fund can continue to use the segregated method in this instance or continue to claim the fund as 100 per cent exempt for the income year,” she explained.
Miranda Brownlee
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.
