Income Tax Calculation

Capital Gain/Loss is the difference between the proceeds received when you dispose of an asset and its cost base.

Your SMSF makes a Capital Gain if the proceeds exceed the cost base.

Your SMSF makes a Capital Loss if the proceeds are less than the cost base.

Concessional Contributions include the following contribution types:

• Employer Contributions
• Salary Sacrifice Contributions
• Personal Contributions where a tax deduction is claimed

Concessional Contributions are taxed at the rate of 15% in the SMSF, irrespective of whether the SMSF has commenced a Simple Account Based Pension.

For more details on Concessional Contributions, please visit our website here.

Dividends are received from your SMSF’s investments in companies shares. The gross dividend amount (i.e. Franked amount + Unfranked amount + Franking Credits) is assessable income for the SMSF. Dividends are recorded on a cash basis, that is, based on the dividend payment or reinvestment date.

Distributions are most commonly associated with Listed Trusts (For example, ETFs) or Managed Funds. The distributions received may contain different types of income and these are detailed on an Annual Tax Statement issued by the Trusts or Managed Funds. The distribution components are recorded in the SMSF’s Annual Tax Return according to the Annual Tax Statements.

Foreign & Franking Credits Offset

It should be noted that any franking credits or foreign credits detailed on the Dividends or Distributions statements are required to be included as Assessable Income. The franking credits and foreign credits may then be claimed as offsets to reduce the Gross Tax.

Other common assessable income for an SMSF includes interest received from Bank, Savings or Term Deposit accounts.

If the SMSF holds a property and receives rental income, this is also included as Assessable Income for the SMSF.

If you have commenced a Retirement Phase Pension within the SMSF, the investment earnings and realised capital gains earned from the assets supporting the Retirement Phase Pension are tax exempt (subject to the Transfer Balance Cap).

You have a Retirement Phase Account in the SMSF when:

• Your Super Benefit is transferred to the Retirement Phase Account by commencing a Simple Account Based Pension (SABP), including a Death Benefit Pension;
• You have commenced a Transition to Retirement Income Stream previously and the TRIS has subsequently entered the Retirement Phase when you turned age 65 or have retired/permanent incapacity/terminal illness and notified the Trustees (R-TRIS).

You have a Non-Retirement Phase Account in the SMSF when:

• You have a balance in the Accumulation Account, which occurs under the following situations:
  1. You have Super Benefits in the SMSF but have not commenced a Pension;
  2. You have made additional contributions or rollovers into the SMSF after commencing a Pension;
  3. You have rolled back your balance in the Retirement Phase Pension into the Accumulation Account.
• You have commenced a Transition to Retirement Income Stream (TRIS) and you are still under age 65 and not retired.

The Retirement Phase and Non-Retirement Phase accounts are "Accounting Accounts" and not actual physical bank accounts. Accordingly, whilst your actual Super Benefit will be invested in a range of assets including cash and shares, ESUPERFUND will allocate the income and realised capital gains made during the financial year between your "Retirement Phase Account" and "Non-Retirement Phase Account" on a proportional basis in the accounting records of your SMSF. No action is required from you. The proportion associated with the Retirement Phase Accounts are claimed as “Exempt Current Pension Income” on the SMSF Tax Return and it reduces your Total Assessable Income.

The total assessable income is the sum of all the income less your Exempt Current Pension Income.

Some expenses incurred by the SMSF may be tax-deductible to the SMSF. Examples of common deductible expenses include:

• ESUPERFUND Annual Compliance fee

  The ESUPERFUND Annual Compliance fee to attend to the taxation and accounting obligations of the SMSF including the audit is tax deductible.

• ATO Supervisory Levy

  The ATO charges an annual supervisory levy and the levy is payable by all SMSFs upon the lodgement of the Annual Tax Return with the ATO. The levy paid by your SMSF is tax deductible in the year the payment is made to the ATO.

  For example, if your SMSF is a newly registered SMSF in the 2024 Financial Year, your SMSF is required to pay $518 as supervisory levy to the ATO upon the lodgement of the 2024 Annual Tax Return. The payment made is then tax deductible in the 2025 Financial Year Tax Return.

  For more details on the SMSF supervisory levy, please refer to our website here.

• Insurance Premiums

  If the SMSF has arranged insurance cover (Life Insurance, Total & Permanent Disability Insurance, Income Protection insurance) for its members, the insurance premiums paid by the SMSF are tax deductible.

  For more details on Insurance within the SMSF, please visit our website here.

It should be noted that some costs incurred by the SMSF are not tax deductible. Examples are:

• Company Set-Up Fee

  If your SMSF has a corporate trustee structure, the fee incurred in setting up the corporate trustee company is capital in nature and is therefore not deductible to the SMSF.

• Brokerage Fees

  Brokerage charges incurred when purchasing or disposing of shares are not tax deductible to the SMSF. They are capital in nature and are therefore added to the cost base of the shares.

• Property Purchase Costs, Initial Repairs and Renovations

  Costs associated with the property purchase such as solicitor’s fees, stamp duty, or pest and building inspections are capital in nature and are therefore not tax deductible.

  Additionally, if your SMSF pays for initial repairs or to renovate the property, the costs incurred will be added to the cost base of the property. They cannot be claimed as deductions.

As detailed above, the investment earnings and realised capital gains earned from the assets supporting the Retirement Phase Pension are tax exempt. The expenses incurred in gaining or producing the exempt income are not allowable deductions.

If the SMSF receives dividends or distributions with Franking Credits attached, the SMSF may claim a Franking Credits tax offset. If the Franking Credits tax offset is not fully utilised to reduce the Gross Tax, your SMSF will receive a refund of the unused portion of the tax offset amount.

The SMSF may be able to claim a Foreign Income Tax Offset where it has paid foreign income tax on an amount included in its Assessable Income. The Foreign Tax Credits are usually detailed on the Dividends Statements or Distributions Annual Tax Statements.

The Foreign Income Tax offset will reduce the SMSF’s Gross Tax.

However, if the total of the Foreign Tax Offset is greater than the Gross Tax, the excess is non-refundable and cannot be carried forward.

If tax was withheld from the interest, dividends or distributions entitlements of the SMSF because the SMSF did not quote its TFN, the associated TFN Tax Credits will be claimed in the SMSF’s Tax Return. The amount is used to offset the tax payable and any excess will be refunded.