Section B: Income - Item 11
Item 11 deals with all income received or entitled to be received, by the fund during the current income year.
If you don't need to complete Section B, remember, if you've included expenses relating to the SMSF's tax-exempt income, to complete Section C: Deductible and non-deductible expenses.
Expenses that are normally deductible, are non-deductible when they relate to tax-exempt income
If the TOFA rules apply to the SMSF, include assessable income from financial arrangements subject to the TOFA rules at the appropriate question. Complete Section I: Taxation of financial arrangements if you include an amount determined under the TOFA rules.
The Income tab comprises:
An Australian super find makes a capital gain or capital loss if a CGT event happens to any of its worldwide CGT assets.
Refer to the Guide to depreciating assets on the ATO website.
If the SMSF had a CGT event during the income year, or if the SMSF received a distribution of a capital gain from a trust, answer Yes at label G.
At label M select Y from the list if an exemption or rollover has been applied to any CGT event.
If you are completing the Net capital gains labels manually and you have applied an exemption, select the relevant code from the list. If you have made more than one exemption, select the code with the highest monetary value.
If you have used the Capital gains worksheet (g) to complete your asset disposal transactions, MYOB Tax will calculate the exemption code for you and integrate all relevant values to the main return.
Whether you enter the code directly at the label in the return or into the worksheet g, you will be prevented from selecting a code that is incompatible with the form type.
Refer to Capital gains worksheet (g) for information on data for Rollover/Retirement or General Exemption.
If you answer Yes at label G or M an amount (or zero) must be entered at label A.
Use the Tax Capital gains worksheet 'g' to record all CGT events and the 'g' will calculate all capital gains and losses and apply current year losses and prior year losses and integrate all relevant values to the labels in the main return and, if the Populate BW checkbox is ticked, will also prepare for lodgment where required, the ATO Capital Gains Schedule (BW).
Capital Gains amounts integrate from the Capital Gains tax worksheet (g) or from the Capital Gains Schedule (BW). To open the ATO schedule directly select Yes at the Quick access to Tax Office CGT point and press [Enter].
Capital Gains tax worksheet
Capital Gains tax worksheet (g) which provides an index of assets transactions you have created.
To open the Capital Gains Worksheet (g) click Label A.
To create a transaction, click the New button.
To record a Prior Year loss for any Asset category
Enter the category of the Asset.
Set the item number to zero.
Enter the amount of the Capital Loss, and click the Prior Year Losses button to dissect the loss into the years in which the loss was incurred.
To generate the ATO Capital Gains Schedule (BW) from the transactions in the worksheet select the Populate BW checkbox.
For calculation of estimate only box: If the net capital gain at label A includes an amount of Foreign Capital Gain, and if foreign tax was paid on that foreign gain, enter the amount of the Foreign capital gain at the special label Net foreign gains included at label A and then enter any foreign tax paid on that gain in the foreign income worksheet (for) in order that any foreign income tax offset is calculated having regard for this amount.
Quick access to Capital Gains Schedule? If you are not using the Capital gains worksheet 'g' answering YES to this prompt will open the ATO Capital Gains schedule for manual completion.
The Gross rent and other leasing and hiring income amounts may be integrated from the generic dissection worksheet available at this Label. Alternatively, the Rental Property Worksheet (ren) may be used to calculate rental income but this does not integrate to the return.
Do not reduce gross rental income by any loss or outgoing incurred in gaining or deriving that income.
Do not reduce gross interest income by any loss or outgoing incurred in gaining or deriving that income.
Use the Tax Interest income worksheet (int) to record the transactions with integration of the gross amount to label C in the main return. Refer to Interest Income worksheet (int) - Entities and Interest Income worksheet (int) - Individuals.
If the TOFA rules apply to the fund, include net foreign income from financial arrangements subject to the TOFA rules at D.
If what you enter at label C includes an amount brought to account under the TOFA rules, also complete Section I: Taxation of financial arrangements. Refer to Guide to the taxation of financial arrangements (TOFA) rules on the ATO website.
For information on non-share dividends and non-share equity interests, refer to Debt and equity tests: guide to the debt and equity tests on the ATO website.
For more information on the CGT treatment of Forestry interests, refer to Capital gains tax home page on the ATO website.
Gross foreign income and Net foreign income amounts integrate from the Foreign Income worksheet (for) and any Foreign income tax offset calculated integrates to label C1 in Section 2. Refer to Foreign income worksheet (for).
If the TOFA rules apply to the fund, include net foreign income from financial arrangements subject to the TOFA rules at D.
If what you show at label D and D1 includes an amount brought to account under the TOFA rules, also complete Section I: Taxation of financial arrangements.
Refer to rules contained in the Guide to the taxation of financial arrangements (TOFA).
Refer to the ATO Capital gains tax home page. A definition of an Australian superannuation SMSF is provided.
The SMSF may also need to complete a Losses schedule. Refer to Losses schedule (BP).
If the SMSF received assessable franked distributions from a New Zealand franking company directly or indirectly through a partnership or trust, work out whether the distribution is assessable refer to the Foreign income return form guide on the ATO website.
The amount at label E integrates from the Foreign income worksheet (for). Refer to Foreign income worksheet (for).
Transfers from foreign super funds or schemes are not exempt from income tax under the exempt current pension income rules.
Write at F the total of the following amounts transferred in the current year from foreign superannuation super funds and schemes to a complying SMSF.
Legislation: Sections 295-200 and 305-80 of the Income Tax Assessment Act 1997.
At label H Gross payments where ABN not quoted amounts are sourced from the Non-individual PAYG Payment Summary Schedule (PS) where the Income type is B and the Payment type is N. Refer to Payment summary schedule (PS).
If you include an amount at H that is exempt current pension income, include it also at Y Exempt current pension income.
The Non-Individual Payment Summary is not deleted using Preparation > Delete schedules. To clear the payment Summary and values integrated to the return, open the schedule and delete the details from it. If you wish to retain the text, then delete the values from the $ amount fields only.
Use the Distributions from Partnerships worksheet (dfp) to enter details of income, shares of credits and deductions directly relating to the distribution and Tax will total these entries and integrate the amounts to the relevant labels in the return. Refer to Distributions from partnerships worksheet (dfp).
If you include an amount at I that is exempt current pension income, include it also at Y Exempt current pension income.
If what you show at I includes an amount brought to account under the TOFA rules, also complete item Section I: Taxation of financial arrangements (TOFA). Refer to rules contained in the Guide to taxation of financial arrangements (TOFA) on the ATO website.
Dividends
If the SMSF was paid a dividend from a private company, you must establish whether the dividend is non-arm's-length income. If the SMSF is a complying SMSF and it is non-arm's-length income, include the dividend and franking credit at U1 Net non-arm's length private company dividends instead of at J, K or L.
Include non-share dividends at J, K and L in the same way as dividends. For more information about non-share dividends see Debt and equity tests: guide to the debt and equity tests.
Use the Gross Dividends worksheet (div) and Tax will integrate the amounts to the relevant labels in the return. Refer to Gross dividends worksheet (div).
If a dividend is considered non-arm's length income, show the amount at item 11 label U1 Net non-arm's length private company dividends.
If you include an amount at J that is exempt current pension income, also include it at Y Exempt current pension income.
Use the Gross Dividends worksheet (div) and Tax will integrate the amounts to the relevant labels in the return. Refer to Gross dividends worksheet (div).
If you include an amount at K that is exempt current pension income, also include it at Y Exempt current pension income.
Franked dividends that are non-arm's-length income of a complying SMSF (include these at U1 Net non-arm's length private company dividends).
Use the Gross Dividends worksheet (div) and Tax will integrate to the relevant labels in the return. Refer to Gross dividends worksheet (div).
If you include an amount at L that is exempt current pension income, also include it at Y Exempt current pension income.
Franking credits attached to a dividend that is non-arm's-length income of a complying SMSF (include these at U1 Net non-arm's length private company dividends).
Debt and equity rules
The debt and equity tests: guide to the debt and equity tests is available on the ATO website and provides an overview of the debt and equity rules and explains what a non-share equity interest is.
Use the Distributions from Trusts worksheet (dft) to enter details of income, shares of credits and deductions directly relating to the distribution and Tax will total these entries and integrate the amounts to the relevant labels in the return. Refer to Distributions from Trusts worksheet (dft).
Consider whether any distributions received from a trust are part of a non-arm's length arrangement. Refer to Taxation Ruling TR 2006/7.
For information on how to include a capital gain received from a trust refer to the Guide to capital gains tax that can be found on the ATO Capital gains tax home page.
If you include an amount at M that is exempt current pension income, also include it at Y Exempt current pension income.
A distribution from a trust is non-arm's-length income if:
The SMSF does not have a fixed entitlement to income from that trust (e.g. it is a discretionary trust), or
The SMSF does have a fixed entitlement to income from that trust and the entitlement was acquired, or income was derived, under a non-arm's-length scheme and the share of net income from the trust is greater than what might otherwise have been expected had the parties been dealing with each other at arm’s length.
Keep a record of the:
Full name of the trust
TFN of the trust
The amount paid by the trust to the SMSF.
Select a code which best describes the type of trust for the amount of income shown at label M. If this amount is from more than one type of trust, select the code that represents the trust with the greatest amount of income. For a description of the trust types, refer to Types of trusts.
Assessable contributions from employers or other third parties are not exempt from income tax under the exempt current pension income rules.
Show at label R1 the amount of total assessable income comprising contributions and payments received by a superannuation fund in the current income year.
Show at label R2 the total assessable amount of personal contributions.
Assessable personal contributions are not exempt from income tax under the exempt current pension income rules.
For more information, see Notice of intent to claim or vary a deduction for personal super contributions on the ATO website.
Section 290-170 of the Income Tax Assessment Act 1997.
Contributions caps
For contributions caps, refer to the publication: Super contributions - too much super can mean extra tax on the ATO website.
Show at label R3 the total of all assessable contributions that the SMSF received in the current year for all members who didn't quote their tax file number (TFN) and where:
A member's account was opened on or after 1 July of the current year or
A member's total assessable contributions for the current year were more than $1,000.
The amount at R3 should not be reduced by any loss or outgoing related to the income.
Do not include employer contributions at R3 if:
The member's account was opened before 1 July 2007, and
The member's total assessable contributions for the current year $1,000 or less (include these employer contributions at R1 Employer contributions).
R3 is mandatory. If there are no R3 Contributions a zero will be defaulted.
Tax on no-TFN-quoted contributions
The SMSF must pay additional tax on no-TFN-quoted contributions. This additional tax must be paid regardless of any tax offsets or amounts the SMSF may have transferred to a life insurance company or PST.
SMSF status | Tax rate (on all assessable contributions) | Additional tax on no-TFN contributions | Overall tax rate on no-TFN contributions |
|---|---|---|---|
Complying fund | 15% | 32% | 47% |
Non-complying | 45% | 2% | 47% |
No-TFN-quoted contributions are not exempted from income tax under the exempt current pension income rules.
If a member provided their TFN to the SMSF for the first time in 2017–18, the SMSF may be able to recover the no-TFN-quoted contributions tax it paid in one of the most recent three income years ending before 2017–18 by claiming a no-TFN tax offset at E2.
Refer to the Section 295-610 of the Income Tax Assessment Act 1997.
An Interest on no TFN offset (ito) is provided at E2 No TFN offset and H6 Credit for interest on no-TFN tax offset in the Calculation statement to assist with these calculations and their integration to the main return labels. Click either of labels E2 or H6 to open the ito worksheet.
If the SMSF transferred an amount to a Life Insurance Company or PST under an agreement that meets the requirements of section 295-260 of the Income Tax Assessment Act 1997.
Show at label R the amount of income otherwise assessable for the income year under Subdivision 295-C of the ITAA 1997 that the trustee of a complying SMSF (the 'transferor') has agreed to transfer to a Life Insurance Company or PST (the 'transferee') in which the SMSF holds investments.
Keep all relevant documents as evidence of the transferee’s consent to accept the transfer of assessable contributions and the associated tax liability.
Legislation
Section 295-260 of the Income Tax Assessment Act 1997
The amount at R is automatically calculated by Tax and is the result of:
R1 Assessable employer contributions
R2 Assessable personal contributions
R3 No TFN Quoted contributions
Less:
R6 Transfer of liabilities to life insurance company or PST
Show deductions allowable against assessable contributions at the appropriate labels in Section C Deductions.
Use the Other income amounts integrate from the Other Income worksheet (oti). Refer to Other income worksheet (oti).
If you include an amount at S that is exempt current pension income, include it also at Y Exempt current pension income.
The worksheet provides a list of relevant income codes, a description and amount field and this set of fields is repeatable. Click Ctrl+Ins to create additional rows.
On integration Tax calculates the code to be returned at the code box as being the code that represents the largest income amount. Assessable balancing adjustments calculated in the Depreciation worksheet (d) will integrate to the oti worksheet.
If what you enter at label S includes an amount brought to account under the TOFA rules, also complete Section I: Taxation of financial arrangements. Refer to Guide to the taxation of financial arrangements (TOFA) rules on the ATO website.
A change in compliance or residency status for a SMSF may result in changes in tax rates which apply to the taxable income of the SMSF.
Assessable income arising from a change in the tax status of the SMSF is not exempt from income tax under the exempt current pension income rules.
Legislation
Sections 295-320 and 295-330 of the Income Tax Assessment Act 1997
Each amount of non-arm’s-length income is reduced by any deductions attributable, either in whole or in part, to that income. Deductions against that income are those that relate exclusively to the non-arm's-length income and as much of other deductions that appropriately relate to that income. Use these deductions to reduce the amount that you show at U1, U2 or U3. The amounts deducted against the SMSF's non-arm's-length income should not be included in Section C.
The total at label U is automatically calculated by Tax and is the result of labels:
U1-Net non-arm's length Private Company Dividends
U2-Net non-arm's length trust distributions and
U3-Net other non-arm's length income
Use the Net non-arm’s length income worksheet (naf) to calculate and integrate the Net non-arm's length income. Refer to Net non-arm's length income worksheet (naf).
Use the Distributions from Trusts worksheet (dft) and the Net non-arm’s length income integrates from the dft to the Net non-arm’s length income worksheet (naf) and then to label U2. Refer to Distributions from Trusts worksheet (dft).
If the total non-arm's length amount is a loss, no value will show at label U.
The naf worksheet provides functionality to store the loss and carry it forward from one year to the next.
Taxation Ruling TR 2006/7 - Income tax: special income derived by a complying SMSF, a complying approved deposit fund or a pooled superannuation trust in relation to the year of income provides guidance on determining when private company dividends are non-arm's length income.
Non-arm's-length income is not exempt from income tax under the exempt current pension income rules.
This is the sum of the right-hand column labels A to U and is automatically calculated by MYOB Tax.
You must read the ATO instructions on completing this label as it is the sole cause of SMSFs having to be lodged over the counter as paper facsimile returns.
If the Fund paid retirement phase superannuation income stream benefits to one or more members in the current year you should complete this item, otherwise you should not complete it and you should not complete item 10.
The amount that you write at Y must be the same as the amount you have included at 10A Exempt current pension income amount in Section A.
To work out your SMSF's ECPI, see Self-managed super funds and tax exemptions on pension assets.
Legislation
Subdivision 295-F of the Income Tax Assessment Act 1997
If your SMSF has PAYG instalments
If you use the instalment rate method to calculate your SMSF's PAYG instalments, you must exclude the SMSF's exempt current pension income from the amount you write at T1 PAYG instalment income on the PAYG activity statement. You can refer to PAYGI instalment essentials on the ATO website.
A dissection grid is provided at this label.