Example:

Angela and Peter are the members and trustees of their SMSF, the AP SMSF. The members have the following interests in the fund at 9 November 2016:

• Angela has an accumulation interest valued at $625,000
• Peter has an account-based pension valued at $1.8 million.

The AP SMSF uses the proportionate method to calculate its ECPI and has been doing so for several years.

On 2 January 2017, Angela commences an account-based income pension using her entire accumulation interest. From this date, the fund’s assets meet the definition of segregated current pension assets, as they are only supporting account-based income streams (that is, the fund is ‘100% in pension phase’).

The fund isn’t eligible for relief under:

• the segregated method, as the fund was not using the segregated method at 9 November 2016, or
• the proportionate method, because the assets became segregated current pension assets during the commencement period.

CGT relief is not available for the fund, despite the fact that Peter needed to commute amounts out of retirement phase to prepare for the transfer balance cap.