It is important to understand that only the earnings from assets supporting a Retirement Phase Account are tax exempt.
Retirement Phase & Non-Retirement Phase Accounts
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:
- You have Super Benefits in the SMSF but have not commenced a Pension;
- You have made additional contributions or rollovers into the SMSF after commencing a Pension;
- 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.
What is an Actuarial Certificate?
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 $110. The Actuarial Fee is payable annually only if required.
When is an Actuarial Certificate Required?
Total Superannuation Balance of ANY member with a Retirement Phase Pension exceeds $1.6 million
From 01 July 2017, an Actuarial Certificate is required If the SMSF has a balance in the Retirement Phase during the
Financial Year and
any member of the SMSF:
- has a Total Superannuation Balance (i.e. the sum of all Non-Retirement Phase and Retirement Phase superannuation
interests across all superannuation funds, not just the SMSF) of more than $1.6 million on 30 June of the
previous Financial Year;
- and is receiving a Retirement Phase Pension from any Superannuation Fund (not necessarily from the SMSF).
Example:
Barney is the sole member of his SMSF and he had an SABP in the SMSF with a balance of $1 million on 30 June 2020.
He also had a balance of $800,000 in the Accumulation Account in another Superannuation Fund on 30 June 2020.
Barney did not make any contribution or rollover into the SMSF during the 2021 Financial Year and his SMSF consists
of only balance in the Retirement Phase Pension. The SMSF will still be required to obtain an Actuarial Certificate
for the 2021 Financial Year stating that all income during the year is tax free given that Barney has a Total
Superannuation Balance of more than $1.6 million on 30 June 2020 (i.e. $1 million + $800,000).
Total Superannuation Balance of ALL members with a Retirement Phase Pension is less than $1.6 million
Where
all members who are receiving a Retirement Phase Pension in the SMSF have a Total Superannuation Balance
of less than $1.6 million on 30 June of the previous Financial Year, an SMSF will require an Actuarial Certificate
if the SMSF has a balance in both the Retirement Phase and Non-Retirement Phase Accounts
at any point during the Financial Year. The Actuarial Certificate will determine the proportion of the SMSF’s earnings which is tax free.
Avoiding the Actuarial Certificate and Associated Fee
Total Superannuation Balance of ANY member with a Retirement Phase Pension exceeds $1.6 million
From 01 July 2017, an Actuarial Certificate cannot be avoided in this case. Your SMSF must obtain an Actuarial Certificate
in order to claim a tax exemption on the earnings.
This is the case even if the SMSF’s entire balance is in the Retirement Phase Pensions during the Financial Year.
Total Superannuation Balance of ALL members with a Retirement Phase Pension is less than $1.6 million
Provided
all members who are receiving a Retirement Phase Pension in the SMSF have a Total Superannuation Balance
of less than $1.6 million on 30 June of the previous Financial Year, an Actuarial Certificate can be avoided
by ensuring that your SMSF does not have a balance in both the Retirement Phase and Non-Retirement Phase Accounts
at any point during the Financial Year. The followings are some examples of situations where an Actuarial Certificate
can be avoided:
1. SMSF with only Retirement Phase Pensions
If your SMSF is entirely in the Retirement Phase from 01 July (i.e. all balances for all members are in SABP/R-TRIS)
and there is no balance in the Non-Retirement Phase Account during the Financial Year, then the SMSF earnings
will be totally in the Retirement Phase (and tax exempt) and will not require an Actuarial Certificate.
2. SMSF which converts entirely to Retirement Phase on 01 July
If your SMSF has a balance in the Non-Retirement Phase Account at 01 July but the balance is converted to Retirement
Phase on 01 July (i.e. if all members commence SABPs with their entire balances or the TRIS enters the Retirement
Phase by satisfying a condition of release) so that the entire SMSF is in Retirement Phase after this date,
with no further balance in the Non-Retirement Phase Account 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.
3. Contributions and Rollovers immediately converted to an SABP
If your SMSF is entirely in the Retirement Phase from 01 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 (i.e. Non-Retirement Phase). If the Accumulation Account is immediately converted to a Retirement
Phase Pension on the date of the contribution or rollover, by applying for an additional SABP (subject to
the
Transfer Balance Cap), the SMSF will not require an Actuarial Certificate and your SMSF income will be
100% tax exempt. For more information on the process of commencing an additional SABP, please click
here.
4. The SMSF is entirely in Non-Retirement Phase and converts entirely to Retirement Phase during the year
If your SMSF is entirely in the Non-Retirement Phase on 01 July and at some date during the year all the members
commence SABPs with their entire balances or the TRIS enters the Retirement Phase by satisfying a condition
of release (all on the same date) and there is no balance in the Non-Retirement Phase Accounts after this date
then your SMSF will not require an Actuarial Certificate. The income when the SMSF is still in the Non-Retirement
Phase will be taxable. The income after the SMSF converts entirely to Retirement Phase in this case, up until
the end of the Financial Year will be tax free.
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