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  • Completing labels in the SMSF annual return

    The following scenarios may help you to understand how to complete the relevant labels in the SMSF annual return.

    The examples below are based on the following background information:

    • the SMSF has a range of investments, mainly Australian shares and managed funds  
      • the portfolio is regularly revised to ensure that the fund is not overweight in any particular share or fund, due to uneven price movement on the ASX – this results in some capital gains and capital losses, and there are capital gain distributions from the managed funds themselves
    • the SMSF has two members and, as at the start of the financial year, ownership of the assets was exactly 50:50
    • the SMSF received $35,000 in dividends, with franking credits of $15,000, from each of the (four) companies invested in, for a total of $200,000
    • the SMSF also earned interest of $200; ordinary trust income of $20,000, with imputation credits of $2,000 from their managed funds; foreign income of $10,000, with a foreign tax credit of $500; and capital gains, all discount, of $4,000
    • the total income of the fund was thus $234,200
    • the expenses are negligible and can be ignored
    • the tax payable, prima facie, is $35,130.

    The following additional assumptions are made in relation to these examples:

    • the fund has all necessary actuarial certificates where required - for example, where the assets are unsegregated  
      • these certificates show a 50% split of income (if the percentage shown on the certificate was different, the calculations in the examples would need to be adjusted to reflect the percentage shown on the certificate)
    • there was no non-arm's length income
    • there were no contributions
    • the pensions met all the requirements under the Superannuation Industry (Supervision) Act 1993.

    Examples 3 to 6 below are scenarios where only some of the assets of an SMSF are held to provide for current pension liabilities.

    Example 3

    The fund has two members, both over 55 years old but not yet 60 years old. One draws a pension of $36,000 from 1 July; the other is still in accumulation phase within the fund. The assets are not segregated.

    The fund would show the following amounts at the specified labels on the SMSF annual return 2017.

    Example of SMSF annual return labels – Item 10 Income

    Item and label

    Value

    Net capital gain (label A)

    $4,000

    Gross interest (label C)

    $200

    Net foreign income (label D)

    $10,000

    Franked dividend amount (label K)

    $140,000

    Dividend franking credit (label L)

    $60,000

    Gross trust distributions (label M)

    $20,000

    Total assessable income (label V)

    $234,000

    Example of SMSF annual return labels – Item 11 Deductions

    Item and label

    Value

    Exempt current pension income (label K)

    $117,100

    Taxable income or loss (label O)

    $117,100

    Example of SMSF annual return labels – Income tax calculation statement

    Item and label

    Value

    Taxable income (label A)

    $117,100

    Gross tax (label B)

    $17,565

    Rebates, offsets, foreign credits (label C)

    $500

    Subtotal (label D)

    $17,065

    Eligible credits (label F)

    $62,000

    Supervisory levy (label H)

    $150

    Total amount due or refundable (label I)

    $44,785
    (refund)

     

    End of example

     

    Example 4

    The fund has two members, both over 55 years old but not yet 60 years old. One draws a pension of $36,000 from 1 July, the other is still in accumulation phase within the fund.

    The assets are segregated. The pensioner is assigned all the shares, and the non-pensioner has all the other assets (as the pension member has all share assets segregated to provide for his benefit, it is assumed that the value of the remaining assets is equal to this amount).

    The fund would show the following amounts at the specified labels on the SMSF annual return 2017.

    Example of SMSF annual return labels – Item 10 Income

    Item and label

    Value

    Net capital gain (label A)

    $4,000

    Gross interest (label C)

    $200

    Net foreign income (label D)

    $10,000

    Franked dividend amount (label K)

    $140,000

    Dividend franking credit (label L)

    $60,000

    Gross trust distributions (label M)

    $20,000

    Total assessable income (label V)

    $234,200

    Example of SMSF annual return labels – Item 11 Deductions

    Item and label

    Value

    Exempt current pension income (label K)

    $200,000

    Taxable income or loss (label O)

    $34,200

    Example of SMSF annual return labels – Income tax calculation statement

    Item and label

    Value

    Taxable income (label A)

    $34,200

    Gross tax (label B)

    $5,130

    Rebates, offsets, foreign credits (label C)

    $500

    Subtotal (label D)

    $4,630

    Eligible credits (label F)

    $62,000

    Supervisory levy (label H)

    $150

    Total amount due or refundable (label I)

    $57,220
    (refund)

     

    End of example

     

    Example 5

    This example uses the same two members as examples 3 and 4. However, in this case the pension started on 1 October. We assume the two dividend payments are for equal amounts ($100,000 before 30 September and $100,000 after this date).

    The assets are not segregated. Some shares were sold in November to provide cash for the pension, and a capital gain of $10,000, discountable, was made. The managed fund, after much questioning, conceded that its capital gains were all made in the last month of the reporting period – that is, June.

    The income for this example will be different to that in examples 3 and 4, due to the additional $10,000 capital gain realised.

    The SMSF will show the following amounts at the specified labels on the SMSF annual return 2017.

    Example of SMSF annual return labels – Item 10 Income

    Item and label

    Values

    Net capital gain (label A)

    $14,000

    Gross interest (label C)

    $200

    Net foreign income (label D)

    $10,000

    Franked dividend amount (label K)

    $140,000

    Dividend franking credit (label L)

    $60,000

    Gross trust distributions (label M)

    $20,000

    Total assessable income (label V)

    $244,200

    Example of SMSF annual return labels – Item 11 Deductions

    Item and label

    Values

    Exempt current pension income (label K) (see note 1)

    $91,575

    Taxable income or loss (label O)

    $152,625

    Example of SMSF annual return labels – Income tax calculation statement

    Item and label

    Values

    Taxable income (label A)

    $152,625

    Gross tax (label B)

    $22,894

    Rebates, offsets, foreign credits (label C)

    $500

    Subtotal (label D)

    $22,394

    Eligible credits (label F)

    $62,000

    Supervisory levy (label H)

    $150

    Total amount due or refundable (label I)

    $39,456
    (refund)

    Note 1: As the assets are not segregated, the amount shown here is 75% of the ECPI that would be calculated for the pensioner if the pension had been payable for the full year.

    If assets in a fund are not segregated and a member starts an income stream, the ECPI deduction for that year is the amount of income attributable to the pensioner apportioned from the commencement date of the pension – that is, if the pension started on 1 March, the ECPI deduction would be 25% of the income attributed to the member (assuming no contributions or special income was received).

    End of example

     

    Example 6

    This example is the same as example 5, except that the assets are segregated (as in example 4).

    The fund would show the following amounts at the specified labels on the SMSF annual return 2017.

    Example of SMSF annual return labels – Item 10 Income

    Item and label

    Value

    Net capital gain (label A)

    $4,000

    Gross interest (label C)

    $200

    Net foreign income (label D)

    $10,000

    Franked dividend amount (label K)

    $140,000

    Dividend franking credit (label L)

    $60,000

    Gross trust distributions (label M)

    $20,000

    Total assessable income (label V)

    $234,200

    Example of SMSF annual return labels – Item 11 Deductions

    Item and label

    Value

    Exempt current pension income (label K) (see note 2)

    $100,000

    Taxable income or loss (label O)

    $134,200

    Example of SMSF annual return labels – Income tax calculation statement

    Item and label

    Value

    Taxable income (label A)

    $134,200

    Gross tax (label B)

    $20,130

    Rebates, offsets, foreign credits (label C)

    $500

    Subtotal (label D)

    $19,630

    Eligible credits (label F)

    $62,000

    Supervisory levy (label H)

    $150

    Total amount due or refundable (label I)

    $42,220
    (refund)

    Note 2: Where a pension is started with segregated assets, the ECPI deduction is equal to all income attributed to the assets funding the pension.

    Where the above pension is started part-way through a year, no apportioning of income occurs if the assets are segregated and the income is all received after the commencement date.

    Where income is received prior to the start of the pension the income received does not form part of the ECPI deduction.

    End of example
      Last modified: 05 Sep 2017QC 21546