A bill was passed recently that contains changes to a number of different superannuation measures, including amendments to:
If your SMSF is in 100% pension mode, the SMSF is using the segregated method for this period.
It is important to note that the segregated method is not to be chosen as a tax avoidance method. One should not use the segregated method to avoid tax on a capital gain and then immediately choose to use the proportionate method for the next financial year.
|Segregated method||Proportionate method|
|Don’t need to generate an actuarial certificate at the end of the financial year.||Easy to use.|
|Any gains or losses made on assets in the pension asset pool are tax-exempt.||Have to generate an actuarial certificate for each relevant year. This includes an actuarial fee.|
|General expenses endured by the segregated assets are not deductible.||Expenses will need to be proportioned for deductibility.|
|It is more complicated as it requires more administration.|
The recent amendment to the ITAA 1997, allows superannuation trustees to choose which method they want to use to calculate ECPI, when the SMSF holds all assets in pension phase but for only part of the year. They can now choose to use the segregated method or the proportionate method for the year.
This will be effective from the 1st of April 2022 but will apply to assessments for the 2021-2022 financial year.
Let’s consider Bill who is the sole member of an SMSF. He is in accumulation phase for the first half of the year and then decides to move his entire balance into pension phase from 1 January.
Clearly these changes present planning opportunities, so trustees and their SMSF professionals should proactively plan the types of transactions discussed above, to coincide with pension activity to obtain the most favourable result.
Superannuation The Fair and Sustainable Superannuation Bill and Excess Transfer Balance Tax Bill legislation which passed in November 2016, introduce the 1 […]
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