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ATO clarifies actuarial certificate confusion

Katarina Taurian
07 September 2015 — 1 minute read

The ATO has acted on numerous enquiries following statements made earlier this year which appeared contrary to general industry practice in relation to actuarial certificates.

In early August, several key SMSF actuarial industry and SMSF professionals met with the ATO to seek clarity on whether a trustee needs an actuarial certificate to exempt income from segregated current pension assets in the first year those assets are supporting a prescribed pension that does not commence on 1 July.

This meeting came about because the ATO made statements at a number of external engagements in the first half of the year confirming the ATO view, in paragraph 42 of TD 2014/7, that SMSFs which do not start a prescribed pension on 1 July need an actuarial certificate to claim exempt current pension income using the segregation method in the first year the fund converts to pension phase.


As a result, several enquiries were made which questioned the ATO view.

Subsequently, the ATO received submissions from key actuarial representatives, detailing an alternative view and confirming that the ATO view was contrary to general industry practice for over 10 years.

The alternative view proposed by industry was discussed and the ATO confirmed that following an internal review of its position an alternative argument was considered reasonable and acceptable to the commissioner, the ATO stated.

“The view that will be reflected in an addendum to TD 2014/7 and updated guidance material on our website is: SMSFs that commence a prescribed pension part way through an income year (i.e. after 1 July) are not required to obtain an actuarial certificate in order for income from segregated current pension assets supporting that prescribed pension to be exempt,” an ATO spokesperson told SMSF Adviser.

“That is, in those circumstances, SMSFS do not need to obtain an actuarial certificate in order to report income from segregated current pension assets supporting the prescribed pension as exempt current pension income (ECPI) on their SMSF annual return.”

Speaking to SMSF Adviser, owner and director of Act 2 Solutions Andy O’Meagher suggested the ATO’s clarification is a positive one for SMSF trustees.

“Although it looked beneficial for the actuaries, because there was going to be a greater number of actuarial certificates required, it would also be increasing the financial compliance burden on the trustees where it is unnecessary,” Mr O’Meagher said.

AMP SMSF’s Peter Burgess similarly told SMSF Adviser that the outcome of this consultation is favourable for the industry.

“They listened to the industry’s arguments and they seem to have accepted the arguments put forward by industry,” he said. “It’s a positive outcome.”

ATO clarifies actuarial certificate confusion
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