Legislation to implement the Government's superannuation reforms passed the Parliament on 23 November 2016, which may significantly impact your SMSF from 01 July 2017.
Due to the Superannuation Reforms, we caution that the information below is only valid until 30 June 2017.
The contents of this webpage will be updated around July 2017 to reflect the new changes.
In the meantime, please click
here for a summary of the Superannuation Reforms.
Pension & Accumulation Account
It is important to understand that every Member has two accounts in a SMSF. These Accounts are an "Accumulation Account" and a "Pension Account". These accounts are simply "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 "Accumulation Account" and your "Pension Account" in the accounting records of your SMSF. Importantly all earnings allocated to the Pension Account are tax free whilst all earnings allocated to the Accumulation Account are taxed at up to 15%.
Allocating Balances between Accounts
When a SMSF has a balance in both the Pension and Accumulation Account at any point during the financial year, an Actuarial Certificate is needed. The actuarial certificate determines what percentage of the Fund was in Pension mode (and hence tax free) and what percentage of the Fund was in Accumulation mode and hence taxable.
Who can prepare an Actuarial Certificate?
An Actuarial Certificate must be prepared by a registered Actuary as it is not legally possible for ESUPERFUND to prepare this document for clients. Typically the fee charged to prepare this document by the Actuary is between $180 and $260, however given the scale of ESUPERFUND, we have been able to negotiate a discounted Actuarial Fee for our clients of only . The Actuarial Fee is payable annually only if required (that is a Member of your SMSF who had commenced a Pension, had a balance in their Accumulation Account at anytime during the financial year).
Avoiding the Actuarial Certificate and Associated Fee
The good news is that the Actuarial Certificate can be avoided in the following instances:
1. SMSF with only a "Pension Account" Balance
If your SMSF is entirely in Pension Mode from 1 July (i.e. all balances for all Members are in Pension Mode) and the Members make no Contributions or Rollovers into the SMSF during the financial year, then the SMSF earnings will be totally in Pension Mode (and tax exempt) and will not require an Actuarial Certificate.
2. SMSF which converts to Pension Mode on 1 July
If your SMSF has an Accumulation Account Balance at 1 July but the balance is converted to Pension Mode on 1 July so that the entire SMSF is in Pension Mode after this date, and no further Contributions or Rollovers are made for the remainder of the financial year, then the SMSF will not require an Actuarial Certificate. In this case the SMSF will be 100% tax exempt. ESUPERFUND will also assist by automatically merging any balance in the Accumulation Account (for a Member who has commenced a Pension) into their Pension Account on 1 July each year. More on the process of merging accounts can be found here.
3. Contributions and Rollovers immediately converted to a Pension
If your SMSF is entirely in Pension Mode from 1 July and monies are contributed or rolled into the SMSF during the financial year, the additional Contributions or Rollovers will be allocated to the Member Accumulation Account. If the Accumulation Account is immediately converted to Pension Mode on the date of the Contribution or Rollover, by applying for an Additional Pension, the SMSF will not require an Actuarial Certificate and your SMSF income will be 100% tax exempt. More on the process of commencing an Additional Pension can be found here.
4. The SMSF is entirely in Accumulation Mode and converts entirely to Pension Mode during the year
If your SMSF is entirely in Accumulation Mode on 1 July then at some date during the year all the Members commence Pensions with their entire balances (all on the same date) and no Contributions or Rollovers are made by any Member after this date then your SMSF will not require an Actuarial Certificate. Due to the market revaluation completed when the Pensions were commenced, we will be able to determine the income up to the Pension Start Date, which will be taxable. The income after the Pension Start Date in this case, up until the end of the financial year will be tax free.