The biggest changes to how super funds claim tax exempt income on pension assets in over a decade take affect for 2017-18 returns.
The Super Reforms coupled with a change in interpretation from the ATO change how exempt current pension income (ECPI) is calculated.
They will mean significant changes for actuarial certificate providers and Accurium is taking the opportunity to release a new and improved actuarial certificate system that will allow clients to deal with the new rules. We will need more data to complete our calculations and more detail will be provided on how to use the result to calculate ECPI. Extensive new help features aim to guide clients through the updates with minimal fuss.
The ATO’s new interpretation on what constitutes a segregated current pension asset becomes mandatory for the 2017-18 financial year leading to additional administrative complexity. Funds that are wholly in retirement phase, even for a short period, must use the segregated method to claim ECPI for income earned during that period.
Integrity measures introduced to support the transfer balance cap will mean a new test each year for whether a fund is eligible to use the segregated method, based on members’ total superannuation balances. Where they are eligible the new deemed segregation rules mean that in some circumstances funds will have no choice but to apply the segregated method or both the segregated and proportionate method in a financial year. Where the test precludes them from using the segregated method they must use the proportionate method and obtain an actuarial certificate, even if they are wholly in retirement phase.
Changes to the tax treatment of transition to retirement income streams (TRIS) also took effect on 1 July 2017, meaning practitioners will have to grapple with these changes for the 2017-18 year too. These reforms effectively mean there are two classes of TRIS, those which aren’t eligible to claim tax exempt income on earnings and those that are because the pensioner has met a condition of release.
These reforms have also had a big impact on SMSF accounting software providers. We have been working closely with our partners over many months to help them implement the changes and to ensure our seamless integration continues.
By doing all the hard work upfront our aim is to take the pain out of the changes for our clients. All the additional data we need for our actuarial calculations under the new rules will be sent to us by our platform partners at the touch of a button. We have also worked closely with them to ensure our results are then used in the correct way to calculate funds’ ECPI.
Accurium’s new system will go live on 2 July following the ATO’s postposed deadline for 2016-17 SMSF returns. For Class Super users our platform integration will be available from launch. BGL SimpleFund 360 will release their upgrade to allow for these changes on 5 July and SuperMate on 7 July. Accurium’s integration will be included in these releases.
For more information on the changes and a wealth of training resources visit our landing page www.accurium.com.au/form-changes
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.