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What is exempt current pension income?

Any ordinary and statutory income a self-managed super fund (SMSF) earns from assets held to support retirement phase income streams is exempt from income tax – this income is commonly referred to as Exempt current pension income (ECPI).

This form of income does not include assessable contributions or non-arm’s length income.

Individuals can choose to claim their ECPI in the SMSF annual return. However, to do so, they must ensure their SMSF assets are valued at current market value. This requirement also applies when a transition to retirement income stream (TRIS) moves into retirement phase.

There are two methods an individual can use to calculate their ECPI – they are the segregated method and the proportionate method.
Generally, an individual uses the segregated method when their fund is 100 per cent in retirement phase (provided the assets are not disregarded small fund assets). If the fund has disregarded small fund assets, then the proportionate method must be applied.

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Transition to retirement

November 25, 2020

The transition to retirement (TTR) strategy allows you to access some of your super while you continue to work.

You are able to use the TTR strategy if you are aged 55 to 60. You can use it to supplement your income if you reduce your work hours or boost your super and save on tax while you keep working full time.

TTR can help ease your mind as you transition into retirement but it can be a bit complex. Before you choose whether you want to use TTR to reduce work hours or save on tax, or even if you want to use TTR altogether, you should figure out how this will impact all aspects of your finances.