Section 273A of the ITAA allows a tax exemption in relation to 'segregated current pension
assets'. These are assets of the superannuation fund which:
Are used exclusively for supporting one of the four approved types of pension
Are identified in advance for this purpose - that is, the segregated assets must be itemised in terms of the type and amount of particular securities.
Can be certified by an actuary as being of sufficient value that:
'the amount of the assets, if accumulated after the particular time at the rate the actuary expects will be the rate of the fund's earnings on those assets, would provide the amount required to discharge in full the whole or the part, as the case may be, of the current pension liabilities as they fall due.'
It should be noted that the assets which are segregated remain static during the period covered by the actuarial certification, which can be up to three years. Any income derived from the segregated assets is, naturally, exempt from tax, but do not in themselves form part of the segregated assets (until further actuarial certification is obtained). This income includes any capital gains realised on the sale of segregated assets.
Advantages
Simplicity - it is easy to identify the investment income which is to be exempt from tax. In addition, if the pension is of the form of an allocated pension, the assets segregated will have a value precisely equal to the allocated pension balance at the date of segregation
Flexibility - whilst the segregated assets need not be varied for three years, they can be modified at any time with further actuarial certification.
Disadvantages
The actuary can certify segregated assets only up to the realistic level required for supporting the pensions.
