Hello and welcome to this month's episode of Ask Lime where we answer your technical questions in relation to SMSFs.
This month's question is as follows: “What are Disregarded Small Fund Assets?” And I am really pleased that these questions come through because there is nothing that gets an Actuary more excited than a Disregarded Small Fund Asset.
So a Fund will have Disregarded Small Fund Assets if it meets 2 criteria. And the first of those is that there needs 1 or more members who has a Total Superannuation Balance of more than $1.6 million at the end of the previous year. And of course that includes Accumulation Balances, it includes Pension Balances, it includes balances in External Funds such as Industry Funds, Public Sector and Retail Funds as well.
And then the second criterion is that, that member with more than $1.6 million in their Total Superannuation Balance must have a Retirement Income Stream Account as well.
So if there's a member that meets those two criteria, then the fund has Disregarded Small Fund Assets.
The next part of the question is, “Why is that important”? And the implication is that if the fund’s assets are disregarded, then the fund’s assets cannot be segregated. The fund must use the unsegregated method. And it is going to use that method in terms of the calculation of tax and ECPI and so on.
So there you have it. That’s what Disregarded Small Fund Assets are all about. Now there is a lot of implications of this and we are going to talk about those in the upcoming episodes of Ask Lime
If you have any other questions relating to this or relating to any other topic, then please send them through and we’ll include them in one of our future episodes as well.
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THIS ARTICLE WAS CORRECT AT THE TIME OF WRITING. SMSF RULES CHANGE OVER TIME AND THE ARTICLE MAY BE LESS RELEVANT IN THE FUTURE.
Greg Einfeld has over 20 years’ experience in the Australian Superannuation and Financial Services industry. He has MEc and MBA degrees, is a licensed financial adviser, a qualified actuary, and specialises in Self Managed Super Funds (SMSF’s). He regularly presents on a variety of SMSF topics including investment, tax, estate planning, pensions, administration and strategies.