What is an Actuarial Certificate?
An Actuarial Certificate is a legal document that states the proportion of a superannuation fund’s income that is exempt from tax.
When is an Actuarial Certificate required?
An Actuarial Certificate is required when a superannuation fund is paying a pension during the ‘retirement phase’, and there are also non-pension accounts in the fund.
If you are not intending to claim any tax benefits, an Actuarial Certificate is not a legal requirement. However, if you want to claim a percentage of your superannuation fund’s income as a tax benefit, then an Actuarial Certificate will be necessary.
What is ‘Retirement Phase’?
Superannuation has two phases:
- Accumulation - when members (or their employers) are making active contributions to the super fund.
- Retirement - when the member receives an income stream (or pension) from their super.
Once a member is receiving a pension from their super (in the Retirement phase), any income the fund generates from their assets is tax exempt. This phase occurs when the member:
- Reaches the age of 65.
- Meets the legislative requirements for retirement before the age of 65 and notifies the fund trustees of his or her retirement.
When is an Actuarial Certificate not needed?
An Actuarial Certificate is not needed if:
- The fund does not intend to claim an income tax exemption for the income supporting a pension.
- The assets of the fund are fully segregated for the whole year into pension and non-pension assets.
What does segregated mean?
This is where the superannuation fund’s pension and non-pension assets are kept separate and distinct.
Is an Actuarial Certificate required for a segregated superannuation fund?
Yes. The tax-exempt percentage of income earned from the mixture of pension and non-pension assets is required.
What does ‘partial segregation’ mean?
Partial segregation means that the superannuation fund’s assets are separated into:
- Pension assets.
- A mixture of pension and non-pension assets.
Is an Actuarial Certificate required for a ‘partial segregation’ superannuation fund?
Yes. As there is still a mixture of pension and non-pension assets in the fund, the tax-exempt percentage of these assets will be required.
Who requires an Actuarial Certificate?
An Actuarial Certificate is required by whoever is preparing the tax return for the superannuation fund.
How and when is the Actuarial Certificate used?
The information in your Actuarial Certificate will be used by whoever is preparing your superannuation fund’s tax return to lessen the fund’s annual tax.
Who can prepare an Actuarial Certificate?
An Actuarial Certificate can only be prepared by a professionally qualified actuary.
How do I obtain an Actuarial Certificate?
The first step is to find an actuary who specialises in providing Actuarial Certificates. There are a lot of actuarial firms in the marketplace, however many focus on other actuarial services. It is a good idea to always check the actuarial firm’s website first to ensure they specialise in providing Actuarial Certificates to superannuation funds.
What will my actuary need from me to complete an Actuarial Certificate?
Each actuarial firm works differently, and as such, will have its own requirements. If you have an external administrator, such as your accountant, they will obtain the certificate on your behalf. If you administer your own fund, G P Osborn has an easy online process to get things started.
What does it cost to get an Actuarial Certificate?
Depending on the format in which the information is provided to the actuary, the cost ranges from $110 to $165, including GST.
How long does it take to produce an Actuarial Certificate?
In most cases, once the relevant information has been received, your actuary can produce an Actuarial Certificate in less than 24 hours.
Do I need an Actuarial Certificate for a Trust?
An Actuarial Certificate is only required if the Trust is a superannuation fund.
What is a ‘transition to retirement phase’ pension?
It is a pension that commences before the actual ‘retirement phase’. This phase gives you the opportunity to access your super while you are still working. To be eligible for the ‘transition to retirement phase’, you must have reached your ‘preservation age’. This will between the ages of 55 and 60, depending on your date of birth.
Is an Actuarial Certificate required for a ‘transition to retirement’ pension?
Yes and no. An Actuarial Certificate is only required once a person has entered the ‘retirement phase’, not before. This can be confusing, as after this point the pension continues to be referred to as a ‘transition to retirement phase’ pension.
What is the difference between a ‘transition to retirement’ pension and an ‘account based’ pension?
A ‘transition to retirement’ pension starts before a person has retired, whilst an ‘account based’ pension starts after they have retired.
Is an Actuarial Certificate required for an ‘account based’ pension?
Is an Actuarial Certificate required if a person is over 60?
This will depend on a couple of factors:
- If a person is between 60 and 65 years of age and has not retired, then they will not need an Actuarial Certificate.
- If they are between 60 and 65 years of age and are permanently retired, they will need an Actuarial Certificate. However, they must notify the Trustee of their superannuation firm that they have retired permanently.
- If they are over 65 years old, they will require an Actuarial Certificate. This is because whether they are retired or not, all of the superannuation income supporting the pension is tax-free.