• Section C: Deductions and non-deductible expenses (item 12)

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    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

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    You must complete Section C.

    • Section C deals with all expenses, both deductible and non-deductible. Provide details of all expenses the SMSF incurred in 2014–15 at the appropriate questions. Do not show cents for any amount you write in this section. In the column headed Deductions, at the appropriate items (A1 to M1), list all expenses and allowances for which the SMSF can claim a deduction.

    In the column headed Non-deductible expenses, at the appropriate items (A2 to L2), list all other expenses. The SMSF cannot claim a deduction for these expenses. They include:

    • income tax paid (write it at L2)
    • expenses incurred in earning exempt current pension income
    • losses or outgoings that the SMSF incurred in deriving an amount that is excluded from assessable income because family trust distribution tax (FTDT) has been paid.

    Do not include super benefits paid at any question in Section C.

    Generally, SMSFs that derive exempt current pension income cannot claim a deduction for expenses to the extent they are incurred in deriving that exempt income. Such expenditure must be apportioned.

    However, some expenditure is deductible and does not have to be apportioned even though the SMSF has exempt current pension income.

    See also:

    Expenses that relate to non-arm's-length income

    Expenses incurred in deriving non-arm's-length income:

    • are not included anywhere in Section C to the extent the expenses are deductible. Such expenses reduce the amount you write at the non-arm's-length income questions (U1, U2 and U3) in Section B;
    • are included in Section C (A2 to L2 as appropriate) to the extent the expenses are non-deductible.

    Expenses that relate to foreign income

    Expenses incurred in deriving foreign income:

    • are not included anywhere in Section C to the extent the expenses are deductible. Such expenses reduce the amount you write at D Net foreign income in Section B
    • are included in Section C (A2 to L2 as appropriate) to the extent the expenses are non-deductible.

    Taxation of financial arrangements (TOFA)

    If the TOFA rules apply to the SMSF, include expenses from financial arrangements subject to the TOFA rules at the appropriate question. Complete Section I: Taxation of financial arrangements if you include an amount determined under the TOFA rules.

    See also:

    Last modified: 15 Jan 2016QC 44344