An actuarial certificate will determine what proportion of fund income is eligible to be exempted from income tax, also known as exempt current pension income (ECPI). Let's have a look at some scenarios.
Is it my intention to claim an exemption from income tax?
It may be that the earnings brought into the fund are so low that the cost of an actuarial certificate is more than the amount of tax being exempted. After determining your tax exempt percentage you can assess whether to treat all your assessable income as taxable or not.
Combined Accounts within the Fund
Do you have both accumulation and pension accounts within your SMSF? If so and your pension assets are not fully segregated from your accumulation assets you will require an actuarial certificate. It should be noted that this means for any period of time within the financial year in question.
Defined Benefit Pensions
Do you have a defined benefit pension, if so you will require a certificate.
If your assets are being treated as segregated and any of the following apply you will need an actuarial certificate:
· If you have paid an income stream benefit other than an allocated pension, market linked pension or
an account based pension;
· If your SMSF is paying one of the above pensions and an additional income stream; and
· If a benefits market value exceeds the funds supporting account balance.
For further information please visit the following ATO link:
What are the requirements for claiming the tax exemption?
This article is general in nature and it is recommended you obtain specific advice from a qualified SMSF specialist to assess your individual requirements.