Total super balance miscalculations putting ECPI at risk

Mr Dunn gave an example of a two-member SMSF that is 100 per cent in pension phase where the SMSF applies the tax exemption under the segregated method because by default, the fund's assets are solely being used to enable the fund to discharge its pension liabilities. In this example one member has $1.45 million in the SMSF and 185,000 in a public offer fund. The other member has $400,000 in their SMSF.

“Forever and a day, what we have done, is we've claimed the tax exemption under the segregated method and haven't been required to obtain an actuarial tax certificate to determine whether we are eligible or not, to have that 100 per cent tax exemption,” he explained.

“The problem that now exists is that when we look at the SMSF in isolation we would simply again claim under the segregated method again and disregard all income gains and losses, in respect to the fund for that financial year.

“However when we add the member's $1.45 million with the $185,000 that they have in a public offer fund, [under the new rules], our SMSF is now going to be required to obtain an actuarial tax certificate, to determine the tax exemption.”

Practitioners are therefore now required to factor in what other balances the individual may have outside of the fund which make up the total superannuation balance, he said.

“What we don't know from the ATO is if we rightly thought that we'd gone off and correctly claimed tax exemption under the segregated method but have later found that the client wasn’t entitled to it in that way, would the client then be denied the right to have a tax exemption for that year?” Mr Dunn questioned.

“Now we would hope that the ATO would allow us to go back and obtain the certificates so that we weren't aggrieved by that process, but it is now a risk that we need to manage. This impacts the administrator but could impact the auditor in terms of their understanding of the financial position of the fund.”