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 cannot 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 7

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:

Gross interest

$30,000 (included at item 10 label C)


$9,000 (30% of $30,000) (included at item 11 label K)

Interest expenses that can be deducted

$140 * (70% of $200) (included at item 11 label A)


$8,940 (ECPI less bank fees incurred in earning exempt income)

Tax losses to be deducted from income**

$1,060 ($10,000 less $8,940) (included at section C label M)

Taxable income

$19,800 (income less ECPI less interest expenses less loss) (included at item 11 label O)

Losses to be carried forward to later years

$0 (included at item 13 label U)

The losses used in this example refer to tax losses as opposed to capital losses.

*The remaining bank fees of $60 (30% of $200) cannot be claimed as a deduction because they were incurred in earning the exempt current pension income.

** Tax losses carried forward must be reduced by net ECPI before they can be offset against assessable income.

End of example
    Last modified: 13 Apr 2015QC 21546