“From the 2022 financial year, there was a bit of a change to how this worked. From the 2018–2021 year, if you had a period of deemed segregation where the fund was solely in retirement phase, you had to be segregated – it wasn’t a choice, you had to have segregation in that period of time and claim ECPI using the segregated method.”

Richardson said there was another change in 2022 in relation to disregarded small fund assets and the annual test that a fund does to determine if it is allowed to have segregation during the year.

“[This test involves] looking at the fund prior to 30 June and seeing if any member has a retirement phase income stream and $1.6 million in terms of superannuation balance. It’s important to note that it is $1.6 million, and it is not indexed like the transfer balance cap, which is at $1.9 million,” he said.

“There was a period when this rule first came where a fund could be solely pension for a full year, but because it met these rules to have disregarded small fund assets, the fund must have the claimant’s exempting income using the proportionate method, and get an actuarial certificate, which would just tell you that the fund was 100 per cent tax exempt.”

However, Richardson said the rule now is that a fund can only have disregarded small fund assets if it is not solely in retirement-based pension for the full year.

“If the fund is in retirement-based pension the entire year, you don’t have disregarded small fund assets and you don’t need the actuarial certificate. You will just claim exempted income using the proportionate method,” he said.

“But if you meet those conditions for a particular year, it means the fund does have disregarded small fund assets and, therefore, will be claiming this exempt income using the proportionate method.”