CA ANZ calls for shake-up to actuarial certificates for SMSFs

In a pre-budget submission, CA ANZ explained that if any portion of an SMSF’s income that is not 100 per cent in pension phase for part of an income year, and the assets are not segregated, the ATO’s view is that the SMSF is required to use the proportionate method to determine the exempt current pension income.

Consequently, this means the SMSF is required to obtain an actuarial certificate for that part of the year if it does not wish to pay income tax on fund earnings during that period.

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In its submission, CA ANZ noted that, in the past, industry practice for funds in this situation was for it to obtain an actuarial certificate for the whole of the income year.

However, in 2017, the ATO made it clear that the commissioner’s view was that funds which have segregated assets at any point in the year must calculate their ECPI using the segregated method for that period.

A number of commentators in the SMSF industry have previously pointed out that the ATO’s interpretation will result in more complex methods for calculating tax exemptions and greater compliance costs for funds.

The submission stated that the government should make a regulatory amendment to permit the previous industry practice to continue indefinitely.

“The requirement to obtain an actuarial certificate for part of an income year is onerous and expensive for an SMSF,” the submission said.

“CA ANZ does not believe industry practice leads to revenue leakage given the method that actuaries typically employ to determine the exempt current pension income percentage.”

The submission also suggested that the government work with the superannuation industry to provide an opportunity for individuals to cease their defined benefit and other restricted pensions, such as market-linked, flexi and term-allocated pensions, so they can transfer the net proceeds to account-based pensions.

“There is a range of complex and interrelated superannuation, tax and social security law considerations that the government will need to consider, working with interested parties in the superannuation industry and related disciplines,” it said.