There have been significant changes made to the ATO interpretation for calculating ECPI in the 2017/2018 Financial year and later for where a fund deemed to be segregated (100% pension phase) as well as changes due to the Super Reforms.
2016 - 2017 and prior financial years:
A fund that was in 100% pension phase for part of an income year was required to obtain an actuarial certificate on the basis that the fund assets were unsegregated for the entire year. The fund was required to apply the actuarial percentage to the fund's income for the entire financial year.
2017 - 2018 and subsequent financial years:
Where an SMSF's assets are unsegregated for part of an income year, the SMSF trustee will be required to obtain an actuarial certificate pertaining to that part of the income year if they wish to claim an ECPI deduction for income received during that period.
This means that if the assets of an SMSF are segregated for only part of an income year and you wish to claim ECPI for the remaining period of the year in which the assets of your SMSF are unsegregated, you will be required to obtain an actuarial certificate for the period your fund's assets are unsegregated.
The previous approach by the ATO and the industry was to either apply the Segregated or Unsegregated method for the entire year.
At 1st July, a fund has two members:
On 1 March the accumulation member converts from the accumulation phase to pension phase making the fund 100% pension phase for the remainder of the year.
2017 and prior financial years treatment
2018 and subsequent financial years treatment
Restrictions on using the Segregated Method
From 1 July 2017, a fund cannot have any assets classified as segregated at any time during a particular financial year if at the previous 30 June:
If a fund cannot be classified as segregated, it simply means it cannot claim its tax exemption on a segregated basis. The fund is still eligible for an exemption but under the Unsegregated method.