• D1 and D2 Capital works expenditure

    Attention

    Warning:

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

    End of attention

    Capital works include the construction, extension, alteration and improvement of any capital asset (such as buildings, dams and roads) and structural improvements such as fences, retaining walls and sealed driveways.

    Does the SMSF have deductible or non-deductible capital works expenditure?

    No

    Leave D1 and D2 blank. Go to E1 and E2.

    Yes

    Read on.

    Write at D1 and D2, as required, the amount that the SMSF calculated in 2014–15 for capital works expenditure.

    Do not include at D1 or D2 capital works expenditure that you can include at another question in Section C.

    Deductible capital works expenditure

    Write at D1 the amount of deductible capital works expenditure. See Capital works expenditure for more information about amounts that are deductible.

    Do not include at D1 capital works expenditure (or any part of such expenditure) that relates to earning:

    Note:

    If the SMSF paid an income stream (pension) to a member, refer to How are expenses treated when an SMSF has ECPI? before you claim a deduction for capital works expenditure.

    Non-deductible capital works expenditure

    Write at D2 the amount of capital works expenditure that is not deductible. For example, if the SMSF uses the capital works area for the purposes of earning exempt income, such as exempt current pension income.

    Example 'SMSF with no ECPI': Capital works expenditure

    SMSF D has no exempt current pension income, foreign income or non-arm's-length income.

    SMSF D spent $40,000 in 2013–14 to renovate its investment property. It is able to deduct 2.5% of this expenditure for 2014-15 (i.e. 2.5% of 40,000 = $1,000).

    SMSF D reports:

    D1 Deductible capital works expenditure $1,000

    D2 Non-deductible capital works expenditure (Blank)

    End of example

     

    Example 'SMSF with ECPI': Capital works expenditure

    SMSF DD pays an income stream to one of its three members and some of its income is exempt from income tax under the exempt current pension income rules.

    SMSF DD spent $40,000 in 2013–14 to renovate its investment property. SMSF DD calculates 2.5% of this expenditure for 2014-15 (ie 2.5% of 40,000 = $1,000).

    Using the rules described at How are expenses treated when an SMSF has ECPI? SMSF DD determines that $250 of the capital works expenditure relates to earning its exempt current pension income.

    SMSF DD reports:

    D1 Deductible capital works expenditure $750

    D2 Non-deductible capital works expenditure $250

    End of example
    Last modified: 15 Jan 2016QC 44344