Completing the self-managed super fund annual return
Completing the self-managed super fund annual return
Overview
This information will help you complete the Self-managed superannuation fund annual return (NAT 71226). The SMSF annual return now comprises your income tax reporting, regulatory reporting and member contributions reporting.
The information highlights some of the more common reporting errors encountered during our compliance activities.
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This is general information and current at the time of publication. It does not attempt to address your specific circumstances. It details specific errors we are seeing in reporting and highlights where you need to pay close attention. If this information does not assist you, we suggest you seek more specific advice before completing your reporting.
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A self-managed super fund assesses its own tax debt or refund. As such, a notice of assessment will not be issued, as the lodgment of the return is deemed to be an assessment.
This information is provided in addition to the Self-managed superannuation fund annual return instructions (NAT 71606).
Section B - income
Item 10 Label Z - capital gains tax (CGT) event relating to forestry managed investment scheme
In returns for previous years, SMSFs were not required to report CGT events specifically relating to their interest in forestry managed investment schemes.
However, if an SMSF has such a CGT event, label Z must now be completed in the SMSF annual return. A CGT schedule must also be completed, regardless of the amount involved.
SMSFs are misreporting their assets in the annual return where the fund did not dispose of an asset. Take into account the CGT consequences of certain transactions. Take care when categorising assets and calculating capital gain or loss, as errors may create a need to adjust an SMSF's annual return, which then may give rise to tax shortfalls.
Item 10 Label A - net capital gain
When you calculate an SMSF's net capital gain, make sure you use the correct calculation method. There are three methods for calculating a capital gain.
Item 10 Label C - gross interest
In this label report the SMSF's interest income amount only and not a loss amount. You cannot include:
- foreign income
- non-share dividends received from holding a non-share equity interest
- trust distributions.
These items should be reported at item 10 label D and D1, item 10 label J, K and L, and item 10 label M respectively.
Item 10 Label F - transfer from foreign funds
If you have transfers from foreign funds that are assessable, you need to report them here. Show the number of transfers in the number box.
Item 10 Label M - gross trust distributions
We have found that many SMSFs are using the incorrect trust code when reporting the type of trust from which they receive a distribution.
The code best describing the type of trust paying the amount of income shown here can be found in table 3, page 15 of the instructions.
If the income is from more than one trust, the code must represent the trust paying the greatest amount of income to the fund.
If the type of trust making the distribution is unknown, contact the trustee before you submit the return.
Item 10 Label R - assessable contributions
Pay attention to what contributions should and should not be included at this label. If you get it wrong, it will affect your calculations.
Item 10 Label S - other income
You need to select from one of six codes to disclose the type of 'other' income.
Item 10 Label T - assessable income due to changed tax status of fund
You must complete this label if the SMSF has been made non-complying. To do this you need to obtain the market value of the SMSF's assets and the amount of crystallised undeducted contributions post June 1983. You must also complete this label if the fund changed from a foreign super fund to an Australian super fund during the year.
Item 10 Label U - net non arms-length income
Non-arm's length income must be reported at this label. The amount reported at this label is a sum of:
- net non-arm's length private company dividends (U1)
- net non-arm's length trust distributions (U2)
- net other non-arm's length income (U3).
Only deductions relating to the non-arm's length component of income can reduce the SMSF's non-arm's length income. Do not include other deductions at this label.
If the final amount is a loss, quarantine the loss for further deduction against future non-arm's length income. Do not show a loss at label U.
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For more information, refer to Self-managed superannuation fund annual return instructions (NAT 71606).
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If you receive any franking credit amounts (attached to dividend payments) report them in section D item 12 label F4 'credit: refundable franking credits'. You should also include any franking credits amounts as assessable income in section B item 10 label I, L, M and/or E.
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Section C - deductions
Item 11 Label K - exempt current pension income (ECPI)
We've seen many reporting issues and common mistakes for ECPI. To help you, we offer detailed information in Self-managed super funds and tax exemptions on pension assets.
ECPI must be reported in section C item 11 label K.
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For further information on ECPI, see the following:
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No deductions against exempt income
Many SMSFs are claiming deductions for approved auditor fees, supervisory levy, management and administration expenses relating to ECPI.
If all the income derived by an SMSF is claimed as ECPI, and there is no other assessable income, these tax-related expenses should not be shown in section C - deductions under label J or label L or any other label. No deductions are allowable against exempt income.
Make sure you read Self-managed super funds and tax exemptions on pension assets.
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Item 11 Label F - death or disability premiums
You need to be aware when claiming under this label only specific deductions for these benefits are allowed. Misreporting may give rise to amendments and subsequently to a tax shortfall being raised.
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Treasury proposed amendments to the tax law to provide transitional relief to complying super funds for the deduction of insurance premiums for disability super benefits (TPD). The transitional arrangements will ensure that the current industry practice for deducting TPD premiums will apply from 1 July 2004 until 30 June 2011.
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Item 11 Label H - approved auditor fee
You need to include the approved auditor fee here, not as part of the management and administration expenses, item 11 label J.
Item 11 Label I - investment expenses and Label J - management and administration expenses
Funds commonly misreport under these two labels. Check if the expenses you want to claim under these two labels are allowed and can be verified.
Funds also need to consider whether the expense is capital or revenue in nature as capital expenses are not deductible. Capital expenses form part of the fund's asset cost base for CGT purposes.
Do not report all eligible expenses in one label. You will need to split them into the correct deduction labels.
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If the fund has both accumulation and pension income, expenses will have to be apportioned between the two.
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Item 11 Label U - forestry managed investment scheme deduction (FMIS)
When reporting a deduction for FMIS, you need to be aware that not all payments to their forest scheme manager are deductible. For example, if the SMSF is a subsequent participant, the amount paid in acquiring the interest in an FMIS is not deductible.
Item 11 Label L - other deductions
Take care when reporting the code that applies to the other deductions.
Section D - income tax calculation statement
Item 12 Label H - supervisory levy
The levy is payable even if the SMSF has no income tax liability for the year.
Section E - losses
If you carry tax losses forward to later income years, show them at item 13 label U.
For net capital losses carried forward, include your amount at item 13 label V. Net capital losses are quarantined and therefore can only be offset against capital gains.
Complete a Losses schedule (NAT 3425) and attach it to the SMSF annual return if:
- the total of the SMSF's tax losses and net capital losses carried forward to later income years is greater that $100,000
- there is a foreign loss.
Section H - assets and liabilities
Asset values of 'managed investments' and 'direct investments' should be reported under this section at questions 14a and 14b respectively.
There are now 19 categories of assets in this section. In particular, what was previously 'overseas assets' has now been separated into five questions:
- 14c(P) overseas shares
- 14c(Q) overseas non-residential real property
- 14c(R) overseas residential real property
- 14c(S) overseas managed investment
- 14c(T) other overseas assets.
Section H Label J - instalment warrants
You must report the full value of the asset at 14b label J 'derivatives and instalment warrants'. Any amounts that the SMSF is still liable to pay must be reported at 15 label V 'borrowings'.
Reporting your regulatory obligations
Section J - regulatory information
The SMSF annual return contains a number of specific regulatory questions. It is important you read and understand each question prior to responding either 'yes' or 'no'.
Section J Label A - in-house assets
Do not include at this label a lease or a lease agreement between the SMSF and a related party of the SMSF involving business real property or in-house asset investments that are subject to the grandfathering provisions (investments or acquisitions made before 11 August 1999 that were not in-house assets at that time, and additions to these existing investments made on or before 30 June 2009 up to the allowable limits).
Section J Label C - related party investments
Include at this label the value of related party investments the SMSF held at any time during the year that were not in-house assets such as grandfathered investments (investments or acquisitions made before 11 August 1999 that were not in-house assets at that time, and additions to these existing investments made on or before 30 June 2009 up to the allowable limits).
Section J Labels G and M
A number of funds are incorrectly reporting information at these labels.
To ensure your responses are correct you should read the question at these labels carefully before answering. Incorrectly reporting information may unnecessarily expose your fund to compliance action and may delay the issuing of the notice of compliance for new funds. Penalties can apply if false and misleading information is provided.
To reconcile your fund's assets and liabilities in section H of the self-managed super fund (SMSF) annual return, you need to accurately report all contributions and transactions for all members and some former members. Reporting accurately at sections F and G allows you to establish a closing account balance for each member that accurately reflects the fund's liability to the member. If you do not report members' closing account balances correctly and transfer the total to label W in question 15, you will not be able to reconcile the fund's assets and liabilities.
This information is provided in addition to the Self managed superannuation fund annual return instructions (NAT 71606).
Use the labels in sections F and G to make sure all contributions and expenditure are accounted for when calculating a member's closing balance.
You must report all the transactions during the financial year that affect the member's closing balance.
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Report only one member information statement per member - if members have multiple accounts, don't report these in separate member information statements.
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Working out the opening balance
The opening balance should be the same as the closing balance reported in the previous financial year, or zero, if the member's account was opened during the reported financial year.
Specific contributions received for the member during the financial year are included here.
This includes contributions made in the same financial year to another super fund and included in rollovers received by the SMSF. These are reported to the SMSF on the rollover benefits statement (RBS) at questions 15(a) to 15(j).
This label is for all other contributions the member receives during the financial year but not reported at labels A to L.
This includes any 'other contributions' that may be included in amounts rolled over from another super fund and reported to you on the rollover benefits statement. To calculate the amount to include at this label, you need to deduct the sum of 15(a) to 15(j) from the amount included at 15(k) on the rollover benefits statement. In most cases this will be 'zero'.
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All contribution labels (A-M) must be reported on a 'cash received' basis. You can only include cash received up to 30 June. Amounts credited under an accruals basis must be reported in the following year.
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This label is for transactions that affected a member's closing balance but are not included in the labels:
The amounts to be reported at this label are worked out from the information you receive on the rollover benefits statement.
The amount is calculated by deducting rollover benefits statement label 15K from the total at rollover benefits statement label 13. You will receive the rollover benefits statement from the member's previous fund (or funds). They should send you the statement within seven days of making a rollover payment.
Examples of how to report with inward rollovers
Example 1
Josh opened an account with a large public offer super fund on 1 July 2007 into which regular employer contributions were made for him. By 1 January 2008 a total of $11,000 had been contributed, which he then rolled from that fund into his new SMSF. The fund deducted tax ($1,650) and an exit fee ($100) and so gave his SMSF $9,250 with a rollover benefits statement that reported:
Question 13 - element taxed in the fund: $9,250
Question 15(a) - employer contributed amount: $11,000
Josh's SMSF continued to receive contributions from his employer that by 30 June 2008 totalled an additional $10,000. His tax agent completed an SMSF annual return for the 2007-08 financial year that reported at section F for Josh:
(Opening account balance: nil)
Label A - employer contributions: $21,000 ($11,000 + $10,000)
Label N - total contributions: $21,000
Label O - allocated earnings, expenses, taxes or losses: $1,750 /loss ($9,250 - $11,000)
Label P - inward amounts less rolled-in contributions reported at N: nil
Label Q - outward amounts reported at question 13 on the RBS: nil
Label R - benefit payments and code: nil
Label S - closing account balance: $19,250 ($21,000 - $1,750)
Example 2
As for example 1, except that Josh's account with the large public offer super fund was not a new account and had a balance at 1 July 2007 of $100,000, made up of employer contributions made over many years. By 1 January 2008 an additional $11,000 had been contributed. He then rolled his entire balance from that fund into his SMSF. The fund deducted tax ($1,650) and an exit fee ($100) and so gave his SMSF $109,250 with a rollover benefits statement that reported:
Question 13 - element taxed in the fund: $109,250
Question 15(a) - employer contributed amount: $11,000
Josh's SMSF continued to receive contributions from his employer that by 30 June 2008 totalled an additional $10,000. His tax agent completed an SMSF annual return for the 2007-08 financial year that reported at section F for Josh:
(Opening account balance: nil)
Label A - employer contributions: $21,000 ($11,000 + $10,000)
Label N - total contributions: $21,000
Label O - allocated earnings, expenses, taxes or losses: $1,750/loss
Label P - inward amounts less rolled-in contributions reported at N: $100,000
Label Q - outward amounts reported at question 13 on the RBS: nil
Label R - benefit payments and code: nil
Label S - closing account balance: $119,250 ($21,000 - $1,750 + $100,000)
Include at this label the rollover amounts paid out to other super entities during the financial year. This is the same amount that you record at question 13 on the RBS that you send to the other fund.
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As the paying fund, you are required to complete a rollover benefits statement within seven days of making a rollover payment.
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Include at this label any full or partial payments made to the member during the reporting financial year.
Reporting inward rollover amounts in the SMSF annual return
If a member has elected to rollover into the SMSF, you must report the amounts from the previous fund in the SMSF annual return.
Reporting of an inward rollover in the SMSF annual return may vary depending on whether current financial year contributions are reported at question 15 of the RBS and the nature of the rollover components reported at question 13 of the RBS.
The information you need to correctly report these rollover amounts will be supplied by your previous fund on a rollover benefits statement.
It is important that you know the nature of the amounts provided and correctly report the contributions. This will ensure that:
- you fulfil your taxation obligations
- contributions are considered for super contributions cap requirements
- you receive any super co-contributions entitlement.
Generally, super funds receiving contributions such as employer contributions or salary sacrifice contributions pay the relevant tax relating to the contributions (this excludes some older style government and constitutionally protected funds).
If you receive these contributions through a rollover in the same financial year that the previous fund received it, the contributions are not reported in the income labels (that is, section B of the SMSF annual return) but are reported in the contributions labels (that is, section F of the SMSF annual return).
When contribution amounts are reported, they are not reduced by any tax, fees or expenses the original super fund has deducted. You should reflect these deductions at label O on the SMSF annual return.
Label 13 on the rollover benefits statement will provide you with all the information to accurately report the benefits received in the rollover. These must be reported at sections F and G, label P. In addition, if there is an amount that is recorded as an untaxed element, this should be recorded at section B, label R2.
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Before sending the rollover payment the originating super fund may claim costs from the rollover payment, which could include:
- administration fees
- charges
- contributions tax.
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Therefore, be aware that contribution amounts reported to you at question 15 on the RBS are the actual gross contributions made to the fund that form part or all of the rollover.
However, the rollover amounts reported to you at question 13 may represent contributions made during the financial year up to the time of the rollover plus any additional funds, but less costs claimed by your previous fund. So in most cases question 15 will not be the same amount as question 13.
Question 15 on the rollover benefits statement provides you with the information you need to correctly report all contributions made to your previous fund during the financial year (that is, from 1 July up until the rollover). You must transfer this information to the relevant contribution labels in your SMSF annual return at section F, or section G if required.
Figures from:
- question 15a are included in section F or G (if required) at label A
- question 15b are included in section F or G (if required) at label B
- question 15c are included in section F or G (if required) at C and/or D
- question 15d are included in section F or G (if required) at label E
- question 15e are included in section F or G (if required) at label F
- question 15f are included in section F or G (if required) at label G
- question 15g are included in section F or G (if required) at label H
- question 15h are included in section F or G (if required) at label I
- question 15i are included in section F or G (if required) at label J
- question 15j are included in section F or G (if required) at label K and/or L.
These amounts form part of the total for label N of sections F and G on the SMSF annual return.
By reporting these amounts correctly you ensure that all contributions for the reporting year can be considered by us for administering the contributions cap and the super co-contribution. It also ensures they are included in the member's closing balance for the financial year.
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Where the cost of the rollover is deducted from the final figures provided to you on the rollover benefits statement, you report the contribution amounts in section F and G and the cost of the rollover at label O on the SMSF annual return. This ensures that the appropriate adjustment is made to the closing balance.
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If a rollover occurs in the financial year following the year in which the contributions were made, the previous fund will be responsible for reporting the contributions received in respect of the member for that year.
However, how the rollover benefit amount is reported and treated for taxation purposes will be affected by the nature of the components of the benefit rolled over by the previous fund.
The rollover benefit reported to you at label 13 may include a tax-free or taxable component, or both. A taxable component may include elements taxed in the fund or untaxed in the fund.
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See label 13 on the rollover benefits statement for details of the components of the benefit.
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If the previous fund reported benefits at the tax-free component and element taxed questions on the RBS, these amounts have had the tax liability paid by the previous fund.
As a result, rolling this money into your SMSF does not constitute income to the SMSF.
If the previous fund reported benefits at the 'element untaxed' question on the RBS, these amounts have been held by the previous fund as untaxed. Funds that treat benefits this way can include some public sector super schemes.
If the rollover benefits statement shows amounts at this label, you will need to report the amounts as income on your SMSF annual return at section B, label R2. This is because:
- the money has not previously been subject to tax
- SMSFs do not have the ability to hold untaxed elements as part of a member's benefit.
By reporting of these amounts correctly, you will ensure your SMSF meets its tax obligations. The SMSF reports these amounts as income and applies the 15% tax in the fund as this amount cannot be applied by the previous fund.
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All amounts shown on the rollover benefits statement at label 13 must also be reported at sections F and G label P on the SMSF annual return, unless they are already included as contributions at labels A-M.
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Section F Label S - working out the closing balance
To work out the closing balance, start with the members closing balance from the previous financial year (or nil for a new member) then add contributions, inward rollovers and allocated earnings, then deduct outward rollovers, payments and losses. Using the labels at section F or G:
- to the opening balance, add
- N Total contributions
- O Allocated earnings or losses
- P Inward rollover amounts
- and subtract
- Q Outward rollover amounts
- R Benefit payments.
For more information about the SMSF annual return:
Last Modified: Monday, 9 January 2012
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