The ATO has provided new guidelines on claiming exempt current pension income (ECPI) for SMSFs. This will significantly change the current industry practice of how ECPI is calculated for the entire financial year where an SMSF was moving in and out of 100% pension phase. The new approach from 1 July 2017 is that a fund must use both segregated method for the period while it is in 100% pension phase and unsegregated method for the period when it is in mixed mode (i.e. pensions and accumulation phase) to work out ECPI.

Class has released the following features to support the 2017/18 actuarial certificate and year-end processing:

  • TRISs will now receive a proportional allocation of tax expense during period updates as another accumulation interest.
  • Updated period update algorithm and ECPI calculation to use the new ATO approach
  • Changes to the integration with actuarial certificate providers to cater for the new ECPI calculation requirements
  • Fund expenses (pension exemption) calculation now incorporates thew new ECPI calculation
  • Exceptions Report – Warning for users to process period update at ECPI calculation method boundary changes and/or TRIS to retirement phase income stream.
  • The new ECPI changes will automatically follow through the SMSF Annual Return
  • There will be no changes to the 2017 and prior actuarial certificate process as it has been grandfathered by the ATO


Old vs New Actuarial Certificate Approach

$1m pension fund and received total contribution of $125,000 in 4 equal instalments, or $31,250 per quarter and sits in accumulation interest for 1 month before it is used to commence a retirement phase income stream in FY 2017-18.


Old Approach: You get one actuarial exemption percentage of 99.065% for the entire financial year and use unsegregated method to determine ECPI.


New Approach: While you still get once actuarial exemption percentage of 97.172%, which is only applicable for the 4 months when the fund is unsegregated.
The remaining 8 months fund is consider to be deemed segregated, therefore it must use both segregated and unsegregated method to determine ECPI.