Savings limited from ECPI rule change

savings ECPI changes

The cost savings for SMSFs no longer having to use an actuarial certificate to calculate fund income are likely to be small, not open to all funds and offset by other costs.

Few SMSFs are likely to benefit from changes that will allow funds to use the segregated method to determine exempt current pension income (ECPI) and any savings may be offset by extra accounting work, according to an sector consultant.

SuperCentral self-managed superannuation executive consultant Michael Hallinan said changes removing the requirement to have an actuarial certificate to determine what percentage of an SMSF’s income is exempt will save around $150 to $250 a year.

“Unfortunately, this cost saving may not be as generous as it seems as the circumstances when the cost saving will apply are fairly limited and other expenses may have to be incurred,” Hallinan said.

“Essentially, the amendment will only benefit SMSFs which are entirely in pension phase for the entire year where the pension liabilities arise exclusively from account-based, including allocated pensions, or from market-linked pensions.”

He noted that where an SMSF was in accumulation phase until day 185 of the financial year and then entirely in retirement phase due to the issuing of one or more account-based pensions on day 186, then under the amendment the fund would not be required to obtain an actuarial certificate for the period from day 186 until the end of the financial year.

“However, accounting work will be required to identify the income and expenses of the SMSF which relate to the first part of the financial year – namely from day 1 to day 185. The problem is that the cost of the additional accounting work may exceed the saving arising from not having to obtain an actuarial certificate,” Hallinan explained.

“In short, this amendment will only benefit SMSFs which would have been prevented from using the segregated method to determine the exempt current pension income by reason only that the assets of the SMSF were disregarded small fund assets.”

The change to the use of an actuarial certificate was introduced in schedule three of the Treasury Laws Amendment (2021 Measures No 6) Act 2021, and is applicable from the 2022 financial year onwards.


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