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.
Net Capital Loss
If the Total Capital Loss exceeds the Total Capital Gain, your SMSF makes a Net Capital Loss.
Importantly, the Net Capital Loss cannot be deducted from other assessable income. The Net Capital Loss may be carried forward to later income years to be deducted from the Capital Gains. There is no time limit on how long you can carry forward a Net Capital Loss.
Net Capital Gain
If the Total Capital Gain exceeds the Total Capital Loss, your SMSF makes a Net Capital Gain. The Net Capital Gain is included as assessable income in the annual Income Tax Return.
Discount on Capital Gains
If an asset was held for over 12 months, the SMSF may be eligible for a discount of 1/3 on the Capital Gains.
Assume the following share disposals occurred during the 2021 Financial Year:
The Total Capital Gains for the above-listed transactions are $6,000 ($2,500 from disposal of Share A and $3,500 from Share B). It should be noted that Share B was held for over 12 months and therefore, the SMSF is eligible for a discount of 1/3 on the Capital Gain.
Total Capital Loss is $400 from the disposal of Share C.
Net Capital Gain assessable = $2,500 + $2,333 (after applying a discount of 1/3 on Share B's Capital Gain) - $400 = $4,433.
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:
- You have Super Benefits in the SMSF but have not commenced a Pension;
- You have made additional contributions or rollovers into the SMSF after commencing a Pension;
- 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.