Taxation of SMSF

The income that a complying SMSF earns from assets which are held to provide pensions is exempt from income tax. This is referred to as exempt current pension income (ECPI). The ECPI exemption can be claimed by all complying SMSFs currently paying super income stream benefits. If your SMSF pays a pension during a year and also has an accumulation balance, you may need to obtain an actuarial certificate to calculate the ECPI.

Taxation

Complying superannuation funds receive concessional tax treatment. The following is a general summary of the taxes payable on your superannuation. Taxation of superannuation can be complex and we recommend that you obtain professional tax advice if you are unsure about how the current taxation regime applies to your own personal circumstances.


Contributions

Concessional contributions are all contributions for which a tax deduction has been claimed. Generally, concessional contributions are taxed in the SMSF at 15%. However, if you earn income of more than $300,000 tax may be payable at 30% on some or all of your concessional contributions. If you exceed your concessional contributions cap for a financial year, an additional tax of 30% (plus Medicare levy) may be payable on the excess contributions. See above for the applicable concessional contribution caps.

Any concessional contributions which exceed your concessional contributions cap will be applied to your non-concessional contributions cap, and could potentially incur a further 45% (plus Medicare levy) excess contributions tax if that amount exceeds or causes you to exceed your non-concessional contributions cap.

Non-concessional contributions include all contributions made from your after-tax income. As tax has already been paid on these contributions, non-concessional contributions are not taxed when they are contributed unless you exceed your non-concessional contributions cap.

If you exceed your non-concessional contributions cap for a financial year, an additional tax of 45% (plus Medicare levy) may be payable on the excess contributions. See above for the applicable non-concessional contribution caps.

Members who are under 65 years of age may bring-forward two years’ of non-concessional contributions and may therefore make up to $450,000 in non-concessional contributions over a three year period without being liable for excess contributions tax.


Investments

Earnings on investments in the SMSF are taxed at a rate of 15%. The effective tax rate may be less than 15% if there are capital gains tax concessions, tax deductions or tax offsets available to the SMSF. Any non-arm’s length income could be considered special income by the ATO and taxed at 45%. No tax is payable on the earnings of investments which support a pension.