The draft regulations for the operation of the Division 296 tax have confirmed actuarial certificates will determine how earnings are attributed to members of an SMSF, according to Accurium head of actuarial services Melanie Dunn.
Dunn noted while much of the draft regulations released yesterday for consultation focused on attributing earnings to members of Australian Prudential Regulation Authority-regulated funds, there was a specific provision for SMSFs, which created a new certificate requirement for trustees.
“For funds with more than one member, the amount of Division 296 fund earnings attributable to each superannuation interest must be determined by reference to an actuary’s certificate,” she said on her firm’s website.
“The attribution formula set out in the regulations is based on each member’s average total superannuation balance value relative to the average sum [of the total super balance values] across all interests in the fund.
“This is broadly consistent with the fair and reasonable approach that underpins actuarial work in the SMSF space today, but with a few new complexities around total superannuation balance calculations.
“The regulations confirm the actuary’s certificate requires the Division 296 earnings, which in turn depends on the fund’s taxable income and exempt current pension income claim being finalised for an income year.”
Heffron managing director Meg Heffron noted while more specific guidance was likely to be issued to actuaries on how to calculate SMSF member earnings, some potential issues were already evident.
“The averages will reflect the timing of transactions, but the fact that earnings themselves are often realised unevenly throughout the year will still result in some curious distortions at an individual level,” Heffron explained in a online post.
“There are some extremely curious adjustments to ensure deceased members continue having earnings attributed to their balances – and subject to Division 296 tax – until the balance is dealt with. While it’s described as an integrity measure, it does seem to introduce a lot of complexity for not much revenue.”
She added the draft regulations confirmed an SMSF with a single member, or a fund with no Division 296 earnings, will not be required to obtain an actuary’s certificate.
Dunn pointed out while the first certificates will not be required until after the 2026/27 fund tax returns have been lodged and the ATO has assessed who will be liable to pay Division 296 tax, SMSF trustees should immediately consider the impact on their funds.