A single asset cannot be treated in a manner that allows it to support some SMSF members in accumulation phase and others with a pension account.
A technical manager has reminded practitioners an SMSF cannot segregate a single asset, allowing it to support both an accumulation account and a retirement-phase pension.
“You can’t segregate part of a single asset. So, when you go to segregate a particular asset, it has to be fully segregated to support the retirement-phase income stream for a member,” Accurium SMSF manager Matthew Richardson told delegates at the Accurium SMSF Compliance Day 2023 in Melbourne last Friday.
“So, for example, with a property you couldn’t say I want 60 per cent to be segregated to support this member’s pension account, leave the other 40 per cent as unsegregated supporting the rest of the fund.
“That property is a single asset of the fund and it has to be fully segregated to support that retirement-phase income stream.”
However, Richardson pointed out there are situations where a type of asset can support both accumulation and pension interests in an SMSF.
“With shares each individual share is an asset, so even if a fund has a parcel of [one particular type of share], you can choose a specific number of them and segregate those to a particular member account,” he said.
According to Richardson, there is one other significant SMSF asset that can be segregated, but doing so brings more compliance considerations into play.
“What about a bank account? That was covered in detail by Tax Determination 2014/7 and essentially a bank account is not a single asset in itself,” he noted.
“So you can in fact say we’re going to take $20,000 which is in the bank account and segregate that to one member and then we’re going to have the rest of the bank account be unsegregated.
“But in doing that you’re essentially creating notional sub-accounts inside that bank account trustees need to keep track of.”
August 28, 2023