You may be able to claim a tax exemption in the SMSF annual return for certain income, once your SMSF commences paying super income stream benefits (commonly referred to as pensions).
Pension liabilities are the SMSF’s liability to pay super income stream benefits. Ordinary income and statutory income that a complying SMSF earns from assets held to provide for super income stream benefits is exempt from income tax. This is referred to as exempt current pension income (ECPI). The ECPI exemption applies to all complying super funds (including SMSFs) currently paying super income stream benefits. An SMSF paying such a benefit is not automatically entitled to the exemption – they must meet certain conditions.
In order to claim the ECPI exemption in the SMSF annual return, there are steps you must take prior to commencing the payment of the super income stream benefit. These include ensuring that all of the SMSF’s assets are re-valued to their current market value prior to commencing payment of the super income stream benefit.
SMSFs will require an actuarial certificate each year where they have not segregated assets in a fund where there are both pension and accumulation accounts.
