• Unsegregated method

    If an SMSF's assets are not specifically set aside for paying a super income stream benefit, the SMSF must determine the amount of exempt income using the unsegregated method.

    An SMSF with unsegregated assets needs to obtain an actuarial certificate that certifies the proportion of income that is exempt.

    In this case, the tax exemption is based on the proportion of the SMSF's average value of current pension liabilities compared to its average value of super liabilities.

    The average value of current pension liabilities is the average value for the income year of the SMSF's current liabilities (contingent or not) for super income stream benefits that are payable by the SMSF in that year. This does not include liabilities that are to be met by segregated current pension assets.

    The average value of super liabilities is the average value for the income year of the SMSF's current and future liabilities (contingent or not) for super income stream benefits for which contributions have, or were liable to have, been made. This does not include liabilities for segregated current pension assets.

    Example 2

    Using the same facts as in example 1, the AXY SMSF has assets of $2,000,000. Member A (who is receiving a super income stream benefit) has an account balance of $1,200,000, and member B (who is still in the accumulation phase) has an account balance of $800,000. In this case, the trustees have obtained an actuarial certificate that shows that 60% of the SMSF's liabilities relate to the paying of the super income stream benefit. No assets are allocated to the member as in example 1. In this case, the exempt income is therefore 60% of the fund's assessable income of $160,000 - that is, $96,000.

    Total assessable income

    $160,000 (included at item 10 label V of the SMSF annual return)

    less ECPI

    $96,000 (the fund claims this exemption by including this amount at item 11 label K of the SMSF annual return)

    equals Taxable income

    $64,000 (included at item 11 label O of the SMSF annual return)

     

    End of example
      Last modified: 13 Apr 2015QC 21546