Disclaimer: the information provided here is not intended as financial product advice. Consult your financial adviser before acting on any information in this document. Always consult closely with Centrelink/DVA before altering asset-test exempt income streams. There are significant penalties for breaching the strict compliance conditions imposed on asset-test exempt income streams.

What are Disregarded small fund assets?

Section 295-387 "Disregarded small fund assets" was added to the ITAA 1997 as part of the Fair and Sustainable Superannuation changes made in 2016.

This definition targets superannuants with more than $1,600,000 in superannuation assets that are also members of SMSFs. An SMSF with at least one member that has more than $1,600,000 in superannuation assets cannot use segregation (ITAA s295-385) to formulate the taxation liability. This will apply even if that member holds less than $1,600,000 of their assets in the SMSF and isn't receiving a pension from that SMSF.

Regardless of the new definition you can still segregate your SMSF for SIS (legal ownership) purposes. For example, you can still have an investment property segregated to Mum and Dad in a fund that also has two of the children. But the whole fund must be treated as unsegregated for the purpose of calculating the tax liability.