When does an SMSF need/require an actuarial certificate?

First we will start by covering an important question – what is an actuarial certificate?
This is a certificate used when you start drawing your pension, that determines what percentage of income from your SMSF will be exempt from tax and what will be taxed at the usual rate (15%).

There are many instances in which an actuarial certificate is needed by your SMSF and so it’s a little easier to cover the occurrences where one is not required. This can be determined by the following:

• When all members of the SMSF are drawing a pension within that financial year
• When the members of the SMSF are in segregation – i.e. when they each hold separate bank and investment accounts – this can happen in family SMSFs where the younger generation keeps money separately from the pensioner parents.
• When your SMSF is running at a taxable loss.
• When your SMSF is running purely in accumulation mode – no one is taking a pension within the financial year.
• When a contribution is made to the SMSF but immediately used as pension and not as accumulated fund (i.e. it has not earned any interest in the SMSF).

In light of the above we can look at examples where they do NOT fall into these instances, meaning an actuarial certificate will be required.

For example, most SMSFs are run with pooled assets – meaning there is only a shared account. As such, the majority of the time there is a need for an actuarial certificate.

When pensions were started part way through a financial year, an actuarial certificate will be required. And if a segregated fund becomes un-segregated during the financial year, then an actuarial certificate will be required then too.

It could be said that an actuarial certificate requirement will be avoided by running segregated funds but this can create much more manual work and be drain on time and resources running your SMSF.

Finally, it should be noted that when your SMSF does require an actuarial certificate it must be prepared by a qualifying actuary.

Disclaimer: This information should not be considered personal financial advice as it is intended to provide general advice only. This factsheet has been prepared by Superhelp Australia Pty Ltd without taking into account your personal objectives, financial situations or needs. The information contained in the fact sheet may not be appropriate to your individual needs, therefore, you should seek personal financial advice before making any financial or investment decisions.