How are assessable contributions and non-arm's length income treated when an SMSF has ECPI?

When calculating the amount of ordinary income and statutory income of the SMSF that is exempt from income tax, non-arm's length income and assessable contributions are excluded from the calculation. You should record these income types in the SMSF annual return under the relevant income labels but not include them when you calculate the SMSF's ECPI.

Generally, assessable contributions are contributions paid to an SMSF either:

  • on behalf of a member (such as super paid by an employer on behalf of an employee)
  • where a member has claimed a personal deduction for those contributions.

Income is non-arm's length income if the:

  • parties to a transaction or a series of transactions are not dealing at arm's length
  • income derived from the transaction is greater than might have been expected had the parties been dealing at arm's length in relation to the transaction.

Non-arm's length income includes income such as private company dividends (including non-share dividends) and certain distributions from trusts.

    Last modified: 13 Apr 2015QC 21546