Disregarded small fund assets explained
What the $1.6 million total superannuation balance test means for SMSF segregation and ECPI certificates.
Disregarded small fund assets (DSFA) can prevent an SMSF from treating assets as segregated for ECPI, even if it would otherwise qualify. The test concerns a member's total superannuation balance across funds, their retirement-phase income stream and the fund's retirement-phase interests; it is not simply a test of the SMSF's own asset value.
What is the $1.6 million test?
Under ITAA 1997 section 295-387, check whether, immediately before the income year, a person had a total superannuation balance above $1.6 million and was receiving a retirement-phase income stream from any source. The SMSF must have at least one retirement-phase interest during the year. The wholly-in-retirement-phase-throughout-the-year exception also matters. Apply the full statutory test to the relevant year.
Why does it matter?
Where the DSFA rule applies, assets cannot be treated as segregated current pension assets under the ordinary rule. The fund may need the proportionate method and an actuarial certificate to claim ECPI. A person's balance outside the SMSF may affect the result.
Information to check
- Each member's total superannuation balance immediately before the income year, across all funds.
- Whether they received a retirement-phase income stream from any source at that time.
- Which interests were in retirement phase in the SMSF and whether the fund was wholly in retirement phase for the entire year.
For the practical next step, see the certificate decision guide or email TCW your fund reports. This is general information, not personal tax advice.
Reviewed 4 October 2026 · TCW Actuarial editorial team
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