• Exempt current pension income

    Income that a complying SMSF earns from assets held to provide for pensions is exempt from income tax. This is called exempt current pension income (ECPI). ECPI does not include assessable contributions or non-arm’s-length income,

    You can claim the tax exemption in your SMSF annual return once your SMSF begins paying 'super income stream benefits' (commonly referred to as pensions). However, your SMSF is not automatically entitled to the exemption. To claim the exemption in the SMSF annual return, there are steps you must take prior to starting payment of the super income stream benefit, such as ensuring that all of the SMSF’s assets are re-valued to their current market value.

    If an SMSF has income tax losses (not capital losses), the amount of the loss should be reduced by the amount of the net ECPI (this is the amount of ECPI less any expenses that were incurred in deriving ECPI). The remaining tax losses can be offset against any assessable income of the SMSF or carried forward to the next financial year.

    Find out more

    Self-managed super funds and tax exemptions on pension assets – for more information to assist you in calculating exempt current pension income.

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    Last modified: 16 Jun 2015QC 23343