The Tax Office has finally provided clarity on the need for self-managed superannuation funds (SMSF) in obtaining actuarial certificates where an SMSF converts to pension phase.

According to the Tax Office, the SMSF does not need an actuarial certificate in the income year where all the members have converted all of their balances from accumulation to pension phase. Taxation Determination 2014/7 has been amended to reflect this position.

It is important to note this only applies if:

– no further contributions or rollovers are made;

– there are no reserves; and

– only account-based, allocated or market linked pensions are being provided.

This position is contrary to long-standing industry practice that an actuarial certificate would be required where an SMSF changed from full accumulation phase to full pension phase part way through an income year.

The previously accepted approach to obtaining an actuarial certificate was considered in our article entitled “Does my SMSF need an Actuarial Certificate?” on page 17 of our September 2015 issue of The Contributor.

Further, the Tax Office has confirmed that there is no requirement to obtain an actuarial certificate if the trustee does not intend to claim any exempt current pension income (ECPI) on their SMSF annual return. This may be the case where the cost of obtaining the actuarial certificate outweighs the value of the tax exemption.

The Tax Office’s previous view on this was that ‘declaring ECPI was not optional’ and an SMSF would not be exempt from an actuarial certificate.

Without doubt, the practical approach adopted by the Tax Office in relation to both matters, which would reduce additional compliance burdens on trustees and advisers, is welcomed.

 

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