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  • Tax losses

    If an SMSF has income tax losses (not capital losses), reduce the amount of the loss by the net ECPI amount.

    The net ECPI amount is ECPI less any expenses that were incurred in deriving ECPI (such expenses can't be claimed as a deduction).

    Then, any remaining tax losses can be offset against assessable income of the SMSF. Once the assessable income is reduced to zero, any further losses can be carried forward to the next financial year.

    Example 5

    AXY SMSF earned $30,000 in interest and paid $200 in bank fees, while 30% of the SMSF's assets were held to provide for the SMSF's current pension liabilities. It has $10,000 in tax losses carried forward from the previous year. This would be shown on the SMSF annual return as follows:

    Section B, Item 11 Income – Example 5

    Field

    Value

    Gross interest (label C)

    $30,000

    Assessable contributions (label R)

    $0

    Gross income (label W)

    $30,000

    Exempt current pension income (label Y)

    $9,000 (30% of $30,000)

    Total assessable income (label V)

    $21,000

    Section C, Item 12 Deductions and non-deductible expenses – Example 5

    Field

    Value

    Interest expenses within Australia (label A1) (see note 4)

    $140 (70% of $200)

    Tax losses deducted (label M) (see note 5)

    $1,060 ($10,000 less $8,940)

    Total deductions (label N)

    $1200

    Taxable income or loss (label O)

    $19,800

    Total non-deductible expenses (label Y)

    $60

    Total SMSF expenses (label Z)

    $1260

    Section E, Item 14 Losses

    Field

    Value

    Tax losses carried forward to later income years (label U)

    $0

    Note that you should also include ECPI in Section A label 10A of the SMSF annual return.

    Note 4: The remaining bank fees of $60 (30% of $200) can't be claimed as a deduction because they were incurred in earning the ECPI.

    Note 5: Tax losses carried forward must be reduced by net ECPI before they can be offset against assessable income.

    See also:

    End of example
      Last modified: 04 Oct 2019QC 21546