In a blog post, Accurium reminded the SMSF industry that the ATO’s new interpretation on what constitutes a segregated current pension asset becomes mandatory for the 2017–18 financial year, which will lead to additional administrative complexity.
“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.
Coupled with this new interpretation on ECPI, the integrity measures introduced to support the transfer balance cap will mean a new test each year to determine whether a fund is eligible to use the segregated method, based on the members’ total superannuation balance.
“Where they are eligible the new deemed segregation rules mean that in some circumstances funds will have no choice but to apply the segregated method or both the segregated and proportionate method in a financial year,” said Accurium.
“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.”
Practitioners will also need to grapple with the changes to the tax treatment of transition to retirement income streams (TRIS), which also took effect on 1 July 2017.
“These reforms effectively mean there are two classes of TRIS, those which aren’t eligible to claim tax exempt income on earnings and those that are because the pensioner has met a condition of release,” said the actuarial certificate provider.
The new interpretation on ECPI along with the reforms to super, it said, represent the “biggest changes to how super funds claim tax exempt income on pension assets in over a decade”.
“They will mean significant changes for actuarial certificate providers and Accurium is taking the opportunity to release a new and improved actuarial certificate system that will allow clients to deal with the new rules,” it said.
“We will need more data to complete our calculations and more detail will be provided on how to use the result to calculate ECPI. Extensive new help features aim to guide clients through the updates with minimal fuss.”
These reforms have also had a big impact on SMSF accounting software providers, said Accurium.
“We have been working closely with our partners over many months to help them implement the changes and to ensure our seamless integration continues,” it said.
“By doing all the hard work upfront our aim is to take the pain out of the changes for our clients. All the additional data we need for our actuarial calculations under the new rules will be sent to us by our platform partners at the touch of a button.”
The new system will go live on 2 July following the ATO’s postposed deadline for 2016–17 SMSF returns.
“For Class Super users our platform integration will be available from launch. BGL SimpleFund 360 will release their upgrade to allow for these changes on 5 July and SuperMate on 7 July. Accurium’s integration will be included in these releases,” it said.
