Assistant Treasurer Michael Sukkar announced yesterday that the changes to exempt current pension income (ECPI) that were announced in the 2019 Federal budget have been delayed.
In measures aimed at reducing red tape, the government had proposed a change to legislation defining what constitutes a segregated current pension asset. The changes promised to do away with the concept of ‘deemed segregation’ and allow trustees the choice of whether to segregate an asset for tax purposes. The intention is to return to the pre 1 July 2017 approach where trustees could choose to adopt the proportionate method to claim ECPI, even if their fund was solely in retirement phase for a period of time.
A second measure was proposed to remove an anomaly that was introduced with the disregarded small fund assets legislation whereby a small number of funds that are solely in retirement phase require an actuary’s certificate to claim ECPI.
These changes were due to take effect from 1 July 2020, but the disruption caused by COVID-19 has meant that the necessary legislation has not been passed in time. The Government has now issued a revised start date for these changes of 1 July 2021. This is a welcome announcement that gives trustees and the industry clarity over what rules we will be operating under for the 2020-21 income year. This also allows the Government sufficient time to consult with industry on the proposed legislation to ensure it operates as intended.
Interestingly, the same announcement also confirmed the Government’s intention to proceed with plans to change number of allowable members in an SMSF for four to six. No date was given for when this might be enacted.
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