An actuarial perspective on SMSF pensions

National Conference 2021

The statutory role of actuaries within the world of SMSFs focuses on dealing with pensions both from an income tax and valuation perspective and this session will examine key insights on both:

• We will explain the rules for claiming exempt current pension income (ECPI) and the impact of the Government’s proposed changes to give members a choice on how to claim ECPI. We will use case studies to identify strategies for optimising the exempt income outcomes for a fund and explore how the ECPI method will affect the taxation of capital gains or losses realised in a year.
• Capped defined benefit income streams in an SMSF pose many challenges. Many of these income streams are now in the late stages of payment approaching expiry or with members now of a very old age. We will summarise the impact on the SMSF of these income streams upon expiry or death of the pensioner, and highlight when and how the strict commutation rules for these income streams can be utilised to reduce complexity and negative outcomes for remaining members in the fund.

At the end of the session, you will be able to:

• Understand how and when an SMSF is eligible to claim ECPI;
• Implement strategies to maximise ECPI on capital gains;
• Explain the government proposed changes to claiming ECPI;
• Understand the implications of capped defined benefit income streams expiring or the member passing away, and;
• Explain the rules for commuting a capped defined benefit income stream.