The Government’s proposed changes to calculating exempt current pension income (ECPI) as well as increasing the age where the work test for making contributions to superannuation applies have been welcomed by the SMSF Association.
Commenting on the 2019-20 Budget announced by the Federal Government tonight, Association CEO John Maroney says streamlining administrative requirements to calculate exempt current pension income (ECPI) is a welcome initiative – and one the Association advocated in its Budget submission as a way to reduce red tape.
“Changes will be made to allow superannuation fund trustees with interests in both the accumulation and retirement phases during an income year to choose their preferred method of calculating ECPI.
“Currently, the ATO requires them to use both the proportionate method and segregated method for relevant parts of an income year, and this can be unnecessarily complex. This change allows prior industry practice of using the proportionate method and calculating ECPI through an actuarial certificate to begin again.
“The Government will also remove the requirement for superannuation funds to obtain an actuarial certificate when calculating ECPI using the proportionate method where all members of the fund are fully in the retirement phase for the entire income year.”
From 1 July 2020, the Government will increase the work test age to 67 to be aligned with the age pension age – another positive change.
Maroney says: “This will allow voluntary superannuation contributions (both concessional and non-concessional) to be made by those aged 65 and 66 without meeting the work test from 1 July 2020.
“It’s the Association’s policy position to support greater flexibility for making contributions to superannuation. Although we suggested that the Government should remove the work test altogether in our Budget submission, this measure is a step in the right direction.”
Maroney says the Government’s decision to largely leave superannuation alone in this Budget would be welcomed by the SMSF sector.
“Many SMSF trustees and their advisers are still experiencing the compliance impacts of the 2016 Budget changes that began on 1 July 2017, so the fact there are no more major changes in the pipeline is extremely positive.”