Tax free income actuarial certificate exempt pension income

You need an actuarial certificate before you can prepare the SMSF annual return for the income year. Once the income tax return is prepared with the correct claim for ECPI (Exempt Current Pension Income), you will need to get the fund audited before lodging the return with ATO.

What expenses can be deducted?

Where an expense is incurred which relates to both accumulation and super income stream based income, the expense must be apportioned so that only the proportion of the expense relating to the production of assessable income is claimed. Higher claims can be made for some administration expenses.

Some specific expenses can be claimed in full, whether they provide exempt or assessable income, such as supervisory levy and death and disability premiums, these expenses should be paid out of accumulation accounts.

When you use the proportional method to claim ECPI you must obtain an actuarial certificate before lodging the annual return as failure to do so may see the deduction claim for ECPI disallowed. You must ensure assets are revalued to their current market value before the commencement of the pension.

If the minimum pension standard hasn’t been met in a year of income, the pension doesn’t meet the definition of a super income stream and ECPI provisions do not apply.

REMEMBER, the above are issues that auditors focus on when it comes to the audit of a SMSF. Our audits for funds start from $300 and follow a comprehensive audit plan.

DISCLAIMER: The above is general advice only, you should not act on this advice without consulting a professional adviser to discuss your personal circumstances.