There has been a practical resolution to the argument surrounding the need for actuarial certificates for funds that have been in pension for the whole year except for a partial commutation on 30th June 2017 to satisfy the transfer balance cap.

The ATO’s view is that all such funds require an actuarial certificate for the day and that the certificate should cover all income earned on that day. This is more than a bureaucratic irrelevance as interest, dividends and distributions may be paid on that day.

The actuaries argue that, traditionally, the ECPI calculation they prepare is an average so that all fund income would be brought to account with 1/365th being taxable. In addition, they argue that the commutation occurred at a second to midnight so that all income was earned before the commutation occurred. Either way the result would be so small as to be irrelevant and the fund would be 100% tax exempt.

The ATO have stuck to their guns but, as a concession, have stated that they will not be disputing 100% ECPI claims for funds that would have been fully segregated except for the 30 June commutation in the 2016/17 financial year. They will be examining any such claims in future years though.

As a consequence we will not be seeking actuarial certificates for any such funds for last financial year.