Under section 283 of the ITAA, a
proportion of the total investment income of a superannuation fund is exempt
from tax. The exempt proportion is based on what is needed to support an
approved type of pension, and determined as:
Current pension liability, divided by:
Total superannuation benefit liability (including current pensions).
The amounts of both liabilities, for current pensions and total superannuation benefits, need to be actuarially certified.
Advantages
Unlike the 'segregated' route, assets do not have to be separately identified for this purpose. Thus this route can be adopted at the end of a financial year, without any special preparation.
It may result in a better tax exemption than the 'segregated' route, depending on the assets held in total by the fund, and on any non-pension benefits provided by the fund.
Disadvantages
The actuarial certification has to be yearly, at the end of each financial year of income.
It is not possible to specify in advance what the effect of the exemption will be. This will depend on the investment income actually earned, and the extent of any non-pension benefits provided.
