• What effect do capital gains and capital losses have on an SMSF's claim for ECPI?

    The effects of capital gains and capital losses are different for segregated and unsegregated assets.

    If your SMSF only has segregated current pension assets, you should ignore any capital gains or capital losses resulting from the disposal of these assets. If the disposal of a segregated current pension asset results in a capital loss, this loss must not be offset against any other capital gain earned by the SMSF.

    If your SMSF has unsegregated current pension assets, you need to factor in capital gains and capital losses. For unsegregated current pension assets, capital losses that arise are not included as deductions when you calculate assessable income. If your SMSF has a net capital loss, it can be carried forward each year until it can be offset against an assessable capital gain. The SMSF's capital gain less any capital losses equals the net capital gain. The net capital gain is added to the SMSF's assessable income before working out how much of income is tax exempt, as per the actuarial calculation for the relevant year.

    Example 10

    Note: This example uses the same facts as example 1.

    AXY SMSF has two members. It has segregated assets set aside for member A that resulted in a capital gain of $10,000 and derived $50,000 of ordinary income. The other assets set aside for member B derived ordinary income of $25,000 and resulted in a capital loss of $15,000. Therefore, the ECPI is the $50,000 for member A. The $10,000 capital gain from these segregated assets is ignored. The $15,000 capital loss from the other assets is carried forward to future years until it can be set off against an assessable capital gain. This would be shown on the SMSF annual return as follows:

    Net capital gains

    $0 (included at item 10 label A)

    Other income

    $75,000 (included at item 10 label S - it is assumed it is 'other assessable income')

    Total assessable income

    $75,000 (included at item 10 label V)

    less ECPI

    $50,000 (included at item 11 label K)

    equals Taxable income

    $25,000 (included at item 11 label O)

    Capital loss carried forward

    $15,000 (included at item 13 label V)

     

    End of example

    You will need to complete a Capital gains tax (CGT) schedule 2009 (NAT 3423) if your SMSF has one or more CGT events that happen during the income year and either:

    • a CGT event happens in relation to a forestry managed investment scheme interest that is held other than as an initial participant
    • the total current year capital gain or capital loss is greater than $10,000.

    Find out more

    About SMSF CGT obligations, refer to the Guide to capital gains tax (NAT 4151).

    End of find out more
      Last modified: 13 Apr 2015QC 21546