The first thing that needs to be confirmed, explained Ms Dunn, is that the fund is solely in retirement phase over an entire income year so that it is 100 per cent exempt from an exempt current pension income perspective.

“Where you have received a contribution and that contribution comes in, it does come into the fund as an accumulation interest,” said Ms Dunn.

“However, if that is immediately put into pension mode so that the fund remains entirely in the retirement phase for the income year, whether that contribution impacts the ability to claim ECPI using the segregated method, the ATO has said is a matter of documentation.”

Ms Dunn said the trustee needs to show that there was no time for any income to be earned in the accumulation phase.

This could be in the form of a minute, she said, which states that the contribution has come in and was immediately converted to a retirement phase income stream.

“That would be sufficient to identify that there was no time for any income to be earned in the accumulation phase and the fund can continue to use the segregated method in this instance or continue to claim the fund as 100 per cent exempt for the income year,” she explained.