ECPI calculations just got a lot harder, says Class

New ATO guidelines have “significantly” changed industry practice of how ECPI is calculated, says Class.

Whereas previously the industry approach was to use either the segregated or unsegregated method for a whole financial year, the ATO guidelines require a different approach for the 2017/18 and later years.

Class has released updates to Class Super which it says will streamline compliance with the new rules.

“For the financial year ended on 30 June 2018 onwards, a fund must use both the segregated method (for the period while it is in 100% pension phase), and the unsegregated method (for any periods where it is in a mix of both pension and accumulation phase). The ECPI percentage must only be applied to income and expenses falling within the unsegregated periods i.e. actuarial certificates now only cover the periods where there are unsegregated assets in the fund,” said Class. Read more...

ATO approach to super funds: “Prevention over Correction”

ATO super funds: “Prevention over Correction”, ECPI, apportionment of expenses, claiming imputation credits and carried-forward capital gainsThe ATO has used a recent speech to highlight some of superannuation issues in its sights, including ECPI, apportionment of expenses, claiming imputation credits and carried-forward capital gains.

Titled ATO audits and reviews of super funds in 2014, the speech was given last week to the Tax Institute National Superannuation Conference by the ATO Assistant Commissioner for Public Groups and International, Peter O’Reilly. Though the speech was aimed at APRA funds, much of it is also relevant for SMSFs. Read more...

Higher contributions tax for those on over $180,000: Mercer

Mercer four point plan: higher contributions tax (Div 293), lifetime contributions caps, limit ECPI and changes to LISC.Extending Division 293 tax to everyone on the highest income bracket is one of the four points in a plan to improve the superannuation system released by consulting firm Mercer.

The four points of the plan are:

  1. Division 293 tax to apply to everyone on the highest tax rate bracket
  2. No-one in the 19% tax bracket to pay contributions tax
  3. Introduce lifetime contribution caps in addition to annual contributions caps
  4. Limit tax-free status of income supporting a pension via an asset cap

Currently Division 293 tax increases the contributions tax for high income earners, those earning more than $300,000, by 15%. Under Mercer’s plan this would extend to people earning more than $180,000. Based on the the 2014/15 tax rates these people would pay 30% on their contributions and have a marginal tax rate of 45%. Read more...