Actuarial firm reveals top queries for ECPI

“The number one question is around disregarded small fund assets. This is a new concept that commenced 1 July 2018 which defines what funds are able to use the segregated method to claim ECPI,” Mr McBirnie explained.

“Essentially, those that have more than $1.6 million aren’t allowed to segregate anymore.”

This change was introduced as part of the integrity measures for the transfer balance cap and requires members to assess whether their fund is eligible to use the segregated method, based on their total superannuation balance.

Where the test precludes them from using the segregated method, they must use the proportionate method and obtain an actuarial certificate, even if they are wholly in retirement phase.

The other main topic the firm is still receiving a lot of queries about is the ATO’s new interpretation on ECPI, also known as deemed segregation, he said.

“Explaining how that works has been quite a challenge. It makes the whole process a bit more complicated,” the general manager said.

The ATO’s interpretation means that funds that are wholly in retirement phase, even for a short period, must use the segregated method to claim ECPI for income earned during that period, Accurium explained previously.

“Where funds are eligible, the new deemed segregation rules mean that, in some circumstances, they will have no choice but to apply the segregated method or both the segregated and proportionate method in a financial year,” it said.

Where member balances preclude the fund from using the segregated method, they must use the proportionate method and obtain an actuarial certificate, even if they are wholly in retirement phase.

While Mr McBirnie said that actuarial certificate providers and the SMSF administration software providers have worked hard to make it as simple as possible, SMSF practitioners still shouldn’t rely completely on the software.

“You need to be able to explain it to your clients if you’re a practitioner,” Mr McBirnie said.