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Accurium release new expense deductibility functionality with every actuarial certificate | Accurium

Did you know using the actuarial percentage to claim a deduction on fund expenses might no longer be fair and reasonable if the fund has deemed segregation?

Whilst the superannuation reforms did not change the principles around deductibility of expenses you do need to be aware of how the new rules for calculating exempt current pension income (ECPI) might change the method used to claim a deduction on expenses that need to be apportioned.

An SMSF can claim a deduction on eligible expenses to the extent they were incurred in producing assessable income. For expenses that need to be apportioned, due to being incurred on assets producing both assessable and exempt income, one fair and reasonable method for determining the deductibility of general expenses used by many practitioners has been a deductibility proportion of (1 – actuarial exempt income proportion).

However in light of the changes to how actuaries calculate the exempt income proportion this may no longer always be appropriate. If a fund has periods where, in the ATO view, assets are deemed to be segregated pension assets, actuaries must exclude those assets from the actuarial calculation. The exempt income proportion would no longer take into account all fund liabilities over the income year where the fund has periods of deemed segregation.

This means that (1 – actuarial exempt income proportion) for funds with deemed segregation does not allow for periods where the fund was solely producing exempt income, and will overstate the fair and reasonable deductibility of expenses.

How Accurium are helping clients with deductibility of expenses 

To assist you in continuing to use an approach which claims a deduction on expenses based on the actuarial calculation Accurium has introduced a new appendix to our actuarial certificates. 

The new ‘Deductibility of expenses’ appendix will provide you with an expense deductibility proportion calculated based on all fund liabilities over an income year. This provides a result that is consistent with previous industry practice of using (1 – actuarial exempt income proportion) but now allows for deemed segregation to ensure the proportion is fair and reasonable for expense deductibility purposes. 

Further information

To further assist you in understanding how exempt income would be calculated over an income year we have also made the ‘Fund liabilities’ appendix permanent in all actuarial certificates. This appendix illustrates the breakdown of fund liabilities during the income year in a chart and provides the details any segregated pension assets. 

Together these two new appendices will make it easier for Trustees to understand how their exempt income and expense deductions were calculated. Further, it will assist auditors in reviewing a fund’s ECPI and expense details claimed in the annual return.

The new appendices will be released Thursday 8th November 2018 and will be included in your next actuarial certificate from that date. 

A big reason so many practitioners use Accurium for their actuarial certificates is our technical support, including access to our monthly CPD accredited webinars and TechHub. Keep an eye out for our Tech News email next week which will include a detailed technical guide to deductibility of expenses.
 
If you have any questions please contact us on 1800 203 123 or email us at act@accurium.com.au. 
 

The information in this document is provided by Accurium Pty Limited ABN 13 009 492 219 (Accurium). It is factual information only and is not intended to be financial product advice, tax advice or legal advice and should not be relied upon as such. The information is general in nature and may omit detail that could be significant to your particular circumstances.  While all care has been taken to ensure the information is correct at the time of publishing, superannuation and tax legislation can change from time to time and Accurium is not liable for any loss arising from reliance on this information, including reliance on information that is no longer current. Tax is only one consideration when making a financial decision. We recommend that you seek appropriate professional advice before making any financial decisions.