ato logo
Search Suggestion:

Tax losses

Last updated 11 April 2022

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: SMSF has income tax losses

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

QC21546