Section 295-390 ITAA 1997: the rule behind your actuarial certificate
What s295-390 of the Income Tax Assessment Act 1997 actually says, why it triggers the actuarial certificate requirement, and how trustees comply.
Many SMSF ECPI certificates using the proportionate method are governed by section 295-390 of the Income Tax Assessment Act 1997. It sets the proportion of eligible income exempt where a complying fund uses the proportionate method.
What s295-390 actually says
In plain terms: where a fund's assets are not segregated for current pension liabilities, the trustee can only treat a proportion of income as exempt. That proportion is the average value of the fund's current pension liabilities divided by the average value of all of the fund's superannuation liabilities for the income year.
s295-390(3): the actuary's certificate is the document that quantifies that proportion. Without it, the fund cannot claim ECPI under the proportionate method.
Why the certificate is mandatory
The calculation requires careful records of:
- Daily liability movements across the year
- Contributions, rollovers, commutations and pension payments
- Disregarded small fund asset (DSFA) rules in s295-387
- Recent ATO guidance on choice of method (since 1 July 2021)
An actuary meeting the statutory definition (a Fellow or Accredited Member of the Institute of Actuaries of Australia) signs to confirm the proportion has been calculated in line with the legislation. The accountant then enters that percentage into the SMSF annual return.
How s295-390 interacts with segregation
Where assets are genuinely segregated for current pension liabilities, s295-385 generally applies instead of s295-390 for that period. Older-style pensions and other exceptions can have different certificate requirements; check the fund's circumstances. Also:
- DSFA rules can prevent segregation when a person has a total superannuation balance across all funds above $1.6m immediately before the income year and receives a retirement-phase income stream from any source. The fund must also have a retirement-phase interest; the full-year retirement-phase exception matters. Read the DSFA guide.
- A fund that is segregated for part of the year and unsegregated for the rest needs a certificate for the unsegregated period.
What this means for trustees and accountants
- If any pension was running and the fund wasn't fully segregated, check whether a certificate is required.
- Keep clean records of pension start dates, commutations, and member balances at 30 June and at every transaction date.
- Order the certificate before signing the SMSF annual return, not after — amendments are messy and slow ATO processing.
Ordering under s295-390
An ECPI certificate under s295-390 starts at $80 + GST. Our target is within four business hours after receiving complete and accurate information, subject to workload and fund complexity. Got an unusual structure? See our document checklist first, then place your order.
Need this for an SMSF you're closing out now? contact us or start an order.