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Exempt current pension income

Claiming a tax exemption for exempt current pension income when your small super fund pays retirement income streams.

Last updated 11 April 2022

  This information is relevant for all complying small superannuation funds with no more than six members, including:
  • self-managed superannuation funds (SMSF)
  • small APRA funds (SAF).

Ordinary and statutory income a small superannuation fund earns from assets held to support retirement-phase income streams is exempt from income tax. This income is called exempt current pension income (ECPI).

ECPI is claimed in the SMSF annual return or the Fund Income Tax Return. To claim ECPI, all of a fund's assets must be valued at current market value. This also applies when a transition to retirement income stream (TRIS) moves into retirement phase.

Note: From 1 July 2017 income from assets supporting a TRIS is not ECPI unless the TRIS is in retirement phase. This applies to all TRIS regardless of the date the TRIS started.

ECPI has also been extended from 1 July 2017 to include income supporting retirement-phase products such as deferred lifetime annuities and self-annuitisation products.

Methods for calculating ECPI

Calculating the amount of ECPI a fund can claim.

Actuarial certificate requirements

A fund may need an actuarial certificate to claim ECPI in the fund's annual return.

Completing labels in the SMSF annual return

Examples on how to complete the relevant labels in the SMSF annual return.

Tax losses

If an SMSF has income tax losses (not capital losses), reduce the amount of the loss by the net ECPI amount.

How expenses are treated when an SMSF has ECPI

Expenses which an SMSF incurs in deriving ECPI can't be claimed on the SMSF annual return.

How capital gains and capital losses are treated when an SMSF has ECPI

The effects of capital gains and capital losses differ depending on which method was used to calculate ECPI.

Non-arm's length income and assessable contributions

SMSFs are required to invest on a commercial, 'arm's-length' basis that reflects the true market value of assets.

QC21546