Actuarial Certificate

An Actuarial Certificate is required when the SMSF is partially in Accumulation mode and partially in Pension or Transition To Retirement (TTR) mode. The certificate determines which portions of the SMSF are taxed at 15% and which at NIL.

Funds that are acting exclusively in one mode (i.e. only in Accumulation, Pension or TTR) do not require an Actuarial Certificate. The Certificate is only required when there is a combination of 15% income and 0% pension income in the same tax year. This is how the ATO ensures that income is allocated correctly between taxable and tax free.

Segregated and proportional methods

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.

Superannuation Warehouse Approach

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

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.

Pension from an Accumulation Account

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.

Questions & Answers – click on the question to reveal the answer

Q: Do I need an Actuarial Certificate if the SMSF has a loss for the year?

An Actuarial Certificate is not required when the SMSF has a taxable loss – which makes sense as there would be zero tax.

Q: My Fund has two Members, one in Accumulation Phase and the other in Pension. The Fund only has a single bank account. Does the Fund need an Actuarial Certificate if using the segregated method for Pension?

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.

Superannuation Warehouse uses the BGL accounting software which accounts for the bank account on a segregated basis. Hence, an Actuarial Certificate is not required if we are your Fund’s administrator.

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 .

Q: Do I need an Actuarial Certificate if my Super Fund invests in cash only?

Our understanding is that an Actuarial Certificate is not required if your Fund’s only asset is cash.

Superannuation Warehouse uses the BGL accounting software which accounts for the bank account on a segregated basis. Hence, an Actuarial Certificate is not required if we are your Fund’s administrator.

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) .

 

  • Jaime Aguirre

    How can I have my SMSF exclusively in pension mode?

    • Hein Preller

      Jaime, do a pension minute effective 1 July, noting all assets as valued at 30 June is moved to your pension account. So NIL remains in the accumulation account. This way the Fund is 100% in pension.
      As actuarial certificate is then not required and the Fund will be taxed at NIL.
      You can download the pension commencement minute from the website.
      Thanks

      • Jaime Aguirre

        Thanks Hein.

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Superannuation Warehouse is an accounting firm and do not provide financial advice. All information provided has been prepared without taking into account any of the Trustees’ objectives, financial situation or needs. Because of that, Trustees are advised to consider their own circumstances before engaging our services.