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Appendix 1: ECPI examples – completing labels in the SMSF annual return

Examples of exempt current pension income (ECPI) to assist you when completing labels in the SMSF annual return (SAR).

Last updated 28 May 2025

When assets are segregated or not segregated

We base examples one to 2 on the following circumstances:

  • the SMSF has 2 members and, as at the start of the financial year, beneficial ownership of the assets was split evenly (50:50)
  • the SMSF received $140,000 in dividends. Franking credits of$60,000 were attached
  • the SMSF also earned $34,200 from
    • interest of $200
    • ordinary trust income of $20,000 (including franking credits of $2,000)
    • foreign income of $10,000
    • discounted capital gains of $4,000
  • the total income of the fund was $234,200 ($200,000 + $34,200)
  • the expenses are negligible and can be ignored.

 

Example 1: assets not segregated

Members A and B have both reached their preservation age. Member A draws a pension of $36,000 from 1 July. Member B is still in accumulation phase within the fund. The assets aren't segregated. The fund has an actuarial certificate detailing that 50% of the fund’s average superannuation liabilities are supporting retirement phase income streams.

Tables 1 and 2 below would be shown on the SMSF annual return.

Table 1: SMSF annual return - Section B, Item 11 Income, assets aren't segregated

Field

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

Assessable contributions (label R)

$0

Gross income (label W)

$234,200

Exempt current pension income (ECPI) (label Y)

 

$117,100

Total assessable income (label V)

$117,100

0 – label A of the SMSF annual return.

 

Table 2: SMSF annual return – Section D, item 13 Income tax calculation statement, assets aren't segregated

Field

Value

Taxable income (label A)

$117,100

Tax on Taxable income (label T1)

$17,565

Tax on no-TFN contributions (label J)

$0

Gross tax (label B)

$17,565

 

 

Subtotal 1 (label T2)

$17,565

Subtotal 2 (label T3)

$17,565

Complying fund's franking credits tax offset (label E1)

$62,000

Refundable tax offsets (label E)

$62,000

Tax payable (label T5)

$0

Tax offset refunds (label I)

$44,435

Supervisory levy (label L)

$259

Amount due or refundable (label S)

$44,176
(refund)

 

 

Example 2: assets are segregated

Members A and B have met their preservation age. Member A draws a pension of $36,000 from 1 July. Member B is still in accumulation phase within the fund.

The assets are segregated. In determining which assets to segregate, the trustee decides to set aside the shares to support the pension. The shares and the remaining assets are of equal value.

Tables 3 and 4 below would show on the SMSF annual return.

Table 3: SMSF annual return - Section B, item 11 Income, assets are segregated

Field

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

Assessable contributions (label R)

$0

Gross income (label W)

$234,200

Exempt current pension income (ECPI) (label Y)

(Based on the income from the share assets that are set aside to support pension liabilities)

$200,000

Total assessable income (label V)

$34,200

Include ECPI from label Y (table 3) in section A, item 10 – label A of the SMSF annual return.

Table 4: SMSF annual return - Section D, Item 13 Income tax calculation statement

Field

Value

Taxable income (label A)

$34,200

Tax on Taxable income (label T1)

$5,130

Tax on no-TFN-quoted contributions (label J)

$0

Gross tax (label B)

$5,130

 

 

Subtotal 1 (label T2)

$5,130

Subtotal 2 (label T3)

$5,130

Complying fund's franking credits tax offset (label E1)

$62,000

Refundable tax offsets (label E)

$62,000

Tax payable (label T5)

$0

Tax offset refunds (label I)

$56,870

Supervisory levy (label L)

$259

Amount due or refundable (label S)

$56,611
(refund)

 

End of example

 

How expenses are treated when an SMSF has ECPI

An SMSF can't claim expenses they incur in deriving ECPI as a deduction in the SMSF annual return. This includes management and administration expenses.

There are certain deductions that can be claimed in full. For example, tax-related expenses such as the supervisory levy and death and disability premiums.

If the SMSF only has a portion earning ECPI:

  • apportion the expense if it's incurred deriving both ECPI and assessable income
  • only claim the proportion of the expense for the production of assessable income.

See TR 93/17 Income tax: income tax deductions available to superannuation funds.

Example 3: SMSF expenses

AXY SMSF earned $60,000 in interest and paid $500 in bank fees. The SMSF held 80% of its assets to provide for current pension liabilities.

Tables 5 and 6 below would be shown on the SMSF annual return.

Table 5: Section B, Item 11 Income

Field

Value

Gross interest (label C)

$60,000

Assessable contributions (label R)

$0

Exempt current pension income (ECPI) (label Y)

$48,000 (80% of $60,000)

Total assessable income (label V)

$12,000

Include ECPI from label Y (table 5) in Section A, item 10 – label A of the SMSF annual return.

 

Table 6: Section C, Item 12 Deductions and non-deductible expenses

Field

Value

Investment expenses (label I1) (see note 1)

$100 (20% of $500)

Total deductions (label N)

$100

Taxable income or loss (label O)

$11,900

Total non-deductible expenses (label Y)

$400

Total SMSF expenses (label Z)

$500

Note 1 The remaining bank fees of $400 (80% of $500) can't be claimed as a deduction, because they were incurred in earning the ECPI.

End of example

Tax losses

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

The net ECPI amount is ECPI less any expenses that were incurred in deriving ECPI.

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 4: SMSF has income tax losses

AXY SMSF earned $30,000 in interest and paid $200 in bank fees. The SMSF held 30% of the its assets to provide for the SMSF's current pension liabilities. It has $10,000 in tax losses carried forward from the previous year.

Table 7, 8 and 9 below would be shown on the SMSF annual return.

Table 7: Section B, Item 11 Income

Field

Value

Gross interest (label C)

$30,000

Assessable contributions (label R)

$0

Gross income (label W)

$30,000

Exempt current pension income (ECPI) (label Y)

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

Total assessable income (label V)

$21,000

Include ECPI from label Y (table 7) in Section A, item 10 – label A of the SMSF annual return.

 

Table 8: Section C, Item 12 Deductions and non-deductible expenses

Field

Value

Investment expenses (label I1) (see note 2)

$140 (70% of $200)

Tax losses deducted (label M) (see note 3)

$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

 

Table 9: Section E, Item 14 Losses

Field

Value

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

$0

Note 2: 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 3: Tax losses carried forward must be reduced by net ECPI before they can be offset against assessable income.

End of example

How capital gains and losses are treated when a SMSF has ECPI.

 

How capital gains and capital losses are treated when an SMSF has ECPI

Example 5: capital gains and capital losses for SMSF's

The fund has 2 members and both have met their preservation age.

Member A draws a pension of $36,000 from 1 July. The fund has segregated assets set aside for member A that resulted in a capital gain of $10,000 and derived $50,000 of ordinary income.

Member B is still in accumulation phase within the fund. 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. As the gain has come from segregated assets 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.

Tables 10 and 11 below would be shown on the SMSF annual return.

Table 10: Section B, Item 11 Income

Field

Value

Net capital gain (label A)

$0

Assessable contributions (label R)

$0

Other income (label S)

$75,000

Gross income (label W)

$75,000

Exempt current pension income (label Y)

$50,000

Total assessable income (label V)

$25,000

 

Table 11: Section E, Item 14 Losses

Field

Value

Net capital losses carried forward to later income years (label V)

$15,000

You should also include ECPI in Section A, item 10 – label A of the SMSF annual return.

Complete a Capital gains tax (CGT) schedule 2025 (NAT 3423-6.2025) 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.
End of example

For more information, see Guide to capital gains tax.

 

QC104729