An Actuarial Certificate is only required when the SMSF is partially in Accumulation mode and partially in Pension mode. The certificate determines which portions of the SMSF are taxed at 15% and which at NIL. This is how the ATO ensures that income is allocated correctly between taxable and tax free.
Funds that are acting exclusively in one mode (i.e. only in Accumulation, Pension or TTR) do not require an Actuarial Certificate. Moreover, from 1 July 2017 the Actuarial Certificate is not needed when the SMSF is partially in Accumulation mode and partially in Transition To Retirement (TTR) mode as both are taxed at 15%.
An Actuarial Certificate is not required if you can identify the specific assets connected to the Pension or TTR in the SMSF. For example, if a bank account is used specifically to pay a pension, all interest on that account will be tax free. The interest earned on a bank account used for accumulation purposes will be taxed at 15%.
Most funds have pooled assets. This means that there’s one bank account and one share trading account. When a pension is paid from here while an accumulation account is also active in the SMSF, an Actuarial Certificate is required.
If your SMSF requires an Actuarial Certificate, Superannuation Warehouse can arrange for one when preparing your year-end accounts. Please note that there is a separate fee for this service, payable by the SMSF.
We do not perform the segregated approach any longer. In the past we used to do accounting using this method. However, this requires too much manual intervention to allocate all assets and expenses to each Member or over Accumulation and Pension accounts. The accounting software we use is not well suited to use this approach. For this reason, we use the pooled approach only. Be mindful there is a cost of $280 to the Fund to obtain an Actuarial Certificate.
Centrelink requests SMSF trustees to prepare an annual Actuarial Certificate of a defined benefit pension. This serves as confirmation that the SMSF is solvent and operating in accordance with the terms and conditions of the pension. Centrelink will ask for a copy of this certificate.
An SMSF can pay a pension from an Accumulation account if a condition of release has been met. This is a good option if the pension balance is low and does not warrant the expense for an Actuarial Certificate.
An Actuarial Certificate is not required when the SMSF has a taxable loss – which makes sense as there would be zero tax.
Our understanding is that an Actuarial Certificate is not required if you can keep track of the income allocation to Members and are able to identify, at any point in time, the portion of the bank account balance supporting the income stream payable to the Member. This can be achieved by using Excel to maintain accurate records or using a specific accounting program.
The ATO provides details on when a Fund’s bank account is regarded a segregated current pension asset. For more detailed information, please see the tax determination TD2014/7 .
Our understanding is that an Actuarial Certificate is not required if your Fund’s only asset is cash.
The ATO provides details on when a Fund’s bank account is regarded a segregated current pension asset. For more detailed information, please see the tax determination TD2014/7 (Example 2) .