Overview

If you have commenced a Retirement Phase Pension within the SMSF, the investment earnings and realised capital gains earned from the assets supporting the Retirement Phase Pension are tax exempt (subject to the Transfer Balance Cap).

The proportion of income associated with the Retirement Phase Accounts are claimed as Exempt Current Pension Income (ECPI) on the SMSF Tax Return and it reduces your SMSF’s Total Assessable Income.

There are different methods to calculate the ECPI depending on your SMSF’s circumstances and an Actuarial Certificate may need to be obtained.

 

 

Retirement Phase Accounts

You have a Retirement Phase Account in the SMSF when:

• Your Super Benefit is transferred to the Retirement Phase Account by commencing a Simple Account Based Pension (SABP), including a Death Benefit Pension;
• You have commenced a Transition to Retirement Income Stream previously and the TRIS has subsequently entered the Retirement Phase when you turned age 65 or have retired/permanent incapacity/terminal illness and notified the Trustees (R-TRIS).

Any earnings allocated to these Retirement Phase Accounts are tax free.

 

 

Non-Retirement Phase Accounts

You have a Non-Retirement Phase Account in the SMSF when:

• You have a balance in the Accumulation Account, which occurs under the following situations:
  1. You have Super Benefits in the SMSF but have not commenced a Pension;
  2. You have made additional contributions or rollovers into the SMSF after commencing a Pension;
  3. You have rolled back your balance in the Retirement Phase Pension into the Accumulation Account.
• You have commenced a Transition to Retirement Income Stream (TRIS) and you are still under age 65 and not retired. If you have retired from the workforce, please complete the “Retirement” Application here. For more information on the definition of retirement, please click here.

Any earnings allocated to these Non-Retirement Phase Accounts are taxable at a rate of up to 15%.

 

 

Allocating Balances between Retirement Phase & Non-Retirement Phase Accounts

The Retirement Phase and Non-Retirement Phase accounts are "Accounting Accounts" and not actual physical bank accounts. Accordingly, whilst your actual Super Benefit will be invested in a range of assets including cash and shares, ESUPERFUND will allocate your Super Benefit between your "Retirement Phase Account" and your "Non-Retirement Phase Account" in the accounting records of your SMSF.

 

 

Exempt Current Pension Income (ECPI) Calculation Methods

The proportion of income associated with the Retirement Phase Accounts are claimed as Exempt Current Pension Income (ECPI) on the SMSF Tax Return and it reduces your SMSF’s Total Assessable Income.

There are two methods for calculating the amount of ECPI:

• Segregated Method
• Proportionate Method

The differences between these two methods are summarised in the following table.

 

 

What is an Actuarial Certificate?

An SMSF is required to obtain an Actuarial Certificate for each Financial Year they claim the ECPI if the Proportionate Method is used to determine the amount of ECPI for any periods of the Financial Year.

The Actuarial Certificate determines what percentage of the SMSF was in the Retirement Phase during a Financial Year (and hence tax free) and what percentage of the SMSF was in the Non-Retirement Phase during a Financial Year (and hence taxable).

An Actuarial Certificate must be prepared by a registered Actuary as it is not legally possible for ESUPERFUND to prepare this document for clients. The Actuarial Fee for ESUPERFUND clients is . The Actuarial Fee is payable annually only if required.

 

 

Which ECPI Calculation Method should the SMSF use?

The following tables summarise the correct method to calculate the ECPI depending on your SMSF’s circumstances and whether an Actuarial Certificate is required.

Between 1 July 2017 and 30 June 2021

Table 1: ECPI Calculation Method b/w 1 July 2017 - 30 June 2021

After 1 July 2021

The rules are slightly different due to some regulation changes post 1 July 2021. Where the SMSF is not required by law to use a particular calculation method, the Trustees can decide which ECPI method is appropriate for the SMSF in some circumstances.

Table 2: ECPI Calculation Method after 1 July 2021