Claiming the Exempt Current Pension Income just got harder for SMSF’s. For as long as I can remember it has been common accepted practice by the ATO that ECPI is calculated based on an SMSF's pension status for the full year.

However, the ATO have suddenly decided that this is not the case, it should be calculated based on periods of segregated and un-segregated. Making calculating ECPI much more difficult and complex for SMSF.

Let say on 1 July, the SMSF has two members, member one’s account is fully in pension phase and member two’s is in accumulation phase. Then on 1 October member two starts a pension with their full balance. Then on 1 March the following year member two makes a concessional contribution. From 1 July to 30 September the fund needs an actuaries certificate to calculated ECPI for the year as it is un-segregated. From 1 October it is treated as segregated under the new ATO interpretation, so does not need an actuaries certificate for this period. Then from 1 March, because of the concessional contribution the fund is un-segregated again, so again needs an actuaries certificate for the period 1 March to 30 June to claim ECPI.

Wow what a mess, previously the fund would be treated as unsegregated for the full year and need only one actuaries certificate for the full year. Under the ATO new interpretation the fund would need two actuary’s certificates or one covering the two un-segregated period. The fund now has to make three calculations to workout it's ECPI for the year.

Would someone please tell the ATO to stop thinking, because it is hurting the rest of the country. Some ATO guru in an office in the basement thought this was a good idea! Hasn’t the government caused enough problems for us of late?