Section B: Income

Is the fund a complying or non-complying fund?

The compliance status of the fund affects how you report income and the tax rates that apply. A regulated fund is a complying superannuation fund unless APRA issues the fund with a notice of non-compliance. If the fund is a regulated superannuation fund and it has not received a notice of non-compliance, then the fund is a complying fund.

How goods and services tax (GST) affects the tax return

If the fund is registered or required to be registered for GST purposes, do not include GST amounts in assessable income in the tax return. The deductions shown should not include any amounts that relate to input tax credit entitlements.

If the fund is not registered and not required to be registered for GST purposes, or if it is not entitled to an input tax credit, the deductions shown are the GST-inclusive amounts that the fund incurred. Special rules apply to GST adjustments. To register for GST, apply at abr.gov.auThis link opens in a new window.

Income to report at item 10

The taxable income of complying superannuation funds is split into a non-arm's length component and a low tax component.

The large APRA Funds, exempt public sector superannuation funds, PSTs and ADFs, the non-arm's length component for an income year is the fund's non-arm's length income for that year less any deductions to the extent that they are attributable to that income.

For small APRA funds, the non-arm's length component is the lesser of:

1. the sum of:
   1. NALI arising from non-arm's length general expense in which the 'Twice the difference approach' is used - excluding any deductions in relation to the general expense; and
   2. all other NALI less any deductions to the extent that they are attributable to that income; and
2. the superannuation entity's taxable income for the year less the contributions included in the entity's assessable income plus any deductions to the extent that they are attributable to those contributions.

If any assessable income is non-arm’s length income of a complying fund, complying ADF or PST that amount should be included at label U Net non-arm’s length income and not at any other label. For small APRA funds, any non-arm's length income as a result of a non-arm's length general expense calculated using a 'Twice the difference approach' is not included at label U Net non-arm's length income or at any other label in item 10. Rather, this amount will be taken into account when calculating the 'Tax on taxable income' at label T1 in Section D.

The low tax component is any remaining part of the fund's taxable income for the income year.

Ensure that you show the correct income components against the corresponding income labels, as different rates of tax apply to different income components.

A concessional rate applies to the low tax component, while the non-arm's length component is taxed at the highest marginal tax rate. The rates are set out in Appendix 3: Rates of tax.

G Did the fund have a capital gains tax (CGT) event during the income year?

A fund makes a capital gain or capital loss if certain events or transactions happen. These are called CGT events. CGT events usually happen to a fund’s CGT assets, such as upon the disposal of a CGT asset by the fund. However, some CGT events relate directly to capital receipts.

If the fund ceases to hold or to use a depreciating asset that was used for both taxable and non-taxable purposes, a CGT event may happen in respect of the asset. A capital gain or capital loss may arise to the extent that the asset was used for a non-taxable purpose. For more information, see the Guide to depreciating assets 2023 (NAT 1996).

A capital gain or capital loss is disregarded in certain circumstances. For example, capital gains or capital losses arising from a CGT event happening in relation to segregated current pension assets of a complying superannuation entity are disregarded.

If the fund chose to apply transitional CGT relief to defer the recognition of certain capital gains that arose as a result of complying with the transfer balance cap and transition to retirement income stream (TRIS) reforms in 2016–17, and a realisation event has occurred during 2022–23, then the deferred capital gain is recognised in 2022–23.

For more information about CGT events, see the Guide to capital gains tax 2023 which includes:

• a capital gain or capital loss worksheet for calculating a capital gain or capital loss for each CGT event
• a CGT summary worksheet for calculating the fund’s net capital gain or capital loss
• a Capital gains tax (CGT) schedule 2023 (NAT 3423).

The Guide to capital gains tax 2023 also explains special CGT rules that apply to foreign residents and trustees of foreign trusts.

The worksheets will help you calculate the net capital gain or capital loss for the income year and complete the CGT questions in the Fund income tax return. You do not have to complete the worksheets, but if you do, do not attach them to the Fund income tax return; keep them with the fund’s tax records.

Print X in the Yes box at item 10 – label G Did you have a CGT event during the year?, if:

• the fund had a CGT event happen during 2022–23
• the fund received a share of net income from a trust that includes a capital gain, or
• the fund is a subsequent participant in a forestry managed investment scheme and had a CGT event as a result of a harvest or sale of its interest in the scheme. See CGT information included at item 10 – label X Forestry managed investment scheme income.

Otherwise, print X in the No box.

If you select Yes you must complete the Capital gains tax (CGT) schedule 2023 (CGT schedule) and attach it to the Fund income tax return if:

• total income year capital gains are greater than $10,000
• total income year capital losses are greater than $10,000, or
• you have elected to apply the transitional CGT relief in 2016–17 and you have a realisation event.

M Has the fund applied an exemption or roll-over?

If the fund has capital gains disregarded or deferred as a result of an application of a CGT exemption or roll-over, print X in the Yes box at label M. Otherwise print X in the No box.

If you selected Yes, you may need to provide details of certain CGT exemptions or roll-overs, if the fund is required to lodge a Capital gains tax (CGT) schedule 2023.

If you selected Yes at label M, print in the code box at label M the appropriate CGT exemption or roll-over code from the list below. Choose the most specific roll-over or exemption code that applies. For example, choose the ‘Scrip for scrip roll-over (Subdivision 124-M)’ code before the more general rollover ‘Replacement asset roll-overs (Division 124)’ code.

If more than one CGT exemption or roll-over applies, select all the codes that apply. If you are lodging on a paper return, print the code that corresponds to the CGT exemption or roll-over that resulted in the largest amount of capital gain disregarded or deferred.

For information about CGT exemptions and roll-overs, see the Guide to capital gains tax 2023.

A Net capital gain

The fund’s net capital gain is the total current year capital gains less the current year capital losses, prior income year net capital losses and any other relevant concession.

Show at label A the amount of net capital gain calculated or transferred from:

• label 6A at part 6 of the CGT summary worksheet
• label A at part 6 of the CGT schedule, if one is required.

Net capital gain includes:

• foreign source capital gains
• the capital gains component of the fund’s share of net income received from a trust
• any capital gains made by the fund from a forestry managed investment scheme. See CGT information included at item 10 – label X Forestry managed investment scheme income
• the amount of capital gain previously deferred under Transitional CGT relief for superannuation funds.

New rules applying to stapled structures took effect from 1 July 2019. The fund may receive amounts attributable to Non-concessional MIT income (NCMI) capital gains or Excluded from NCMI capital gains. You must include these amounts in the calculation of the amount at item 10 – label A Net capital gain. For more information about NCMI, see Stapled structures.

Do not show at label A any net capital gain to the extent it reflects any non-arm’s length capital gains of a complying superannuation fund, complying ADF or a PST. Show this amount at label U Net non-arm’s length income.

For how to calculate the fund’s net capital gain or for special CGT rules that apply to foreign residents or trustees of foreign trusts or subsequent participants in a Forestry Managed Investment Scheme, see the Guide to capital gains tax 2023.

The fund may need to complete a Losses schedule 2023. For more information, see Who must complete a Losses schedule?

B Gross rent and other leasing and hiring income

Show at label B gross rental income from land and buildings and income from leasing and hiring unless it is to be included at a different label. Do not reduce gross rental income by any loss or outgoing incurred in gaining or deriving that income.

Do not show at label B:

• any rental, leasing or hiring income derived from foreign sources – show this at labels D Net foreign income and D1 Gross foreign income
• any rental income included in a share of net income from a trust – show this at label Q Trust distributions other amounts
• any rental, leasing or hiring income to the extent it is non-arm’s length income of a complying superannuation fund, complying ADF or a PST – show this amount at label U Net non-arm’s length income.

C Gross interest

Show at label C the fund's gross interest income unless it is to be included at a different label. Do not reduce gross interest income by any loss or outgoing incurred in gaining or deriving that income.

If the taxation of financial arrangements (TOFA) rules apply to the fund, include interest from financial arrangements subject to the TOFA rules at label C.

Do not show at label C:

• any interest income derived from foreign sources – show this amount at labels D Net foreign income and D1 Gross foreign income
• any interest income included in a share of net income from a trust – show this amount at label Q Trust distributions other amounts
• any interest income to the extent it is non-arm’s length income of a complying superannuation fund, complying ADF or a PST – show this amount at label U Net non-arm’s length income
• non-share dividends received from holding a non-share equity interest.
  If the fund holds such an interest, the issuer is obliged to forward a dividend statement with details of the dividends, which should be shown at item 10 – labels J, K and L as applicable.

For information on non-share dividends and non-share equity interests, see the Guide to the debt and equity tests.

Record keeping

Keep a record of the following:

• the name and address of borrowers
• amounts received or credited.

X Forestry managed investment scheme income

Show at label X the total income from the forestry interests that the fund holds in forestry managed investment schemes (FMISs). The amount you show at label X will depend on the points below.

Do not include capital gains from an FMIS; show these at label A Net capital gain. For more information on the CGT treatment of the fund’s forestry interests, see the Guide to capital gains tax 2023.

If the fund is a member of a collapsed agribusiness managed investment scheme, for information about calculating your income and deductions, see Collapse and restructure of agribusiness managed investment schemes – participant information.

Definitions

The fund is an initial participant in an FMIS if:

• the fund obtained its forestry interest in the FMIS from the forestry manager of the scheme, and
• the fund’s payment to obtain the forestry interest in the FMIS results in the establishment of trees.

The fund is a subsequent participant in an FMIS if it acquired its interest through secondary market trading. This means it acquired its interest other than as an initial participant, usually by purchasing that interest from an initial participant in the scheme.

The forestry manager of an FMIS is the entity that manages, arranges or promotes the FMIS.

A forestry interest in an FMIS is a right to the benefits produced by the FMIS (whether the right is actual, prospective or contingent and whether or not it is enforceable).

The amount of the fund’s total forestry scheme deductions is the total of all the amounts that it can deduct or has deducted for each income year that it held its forestry interest. See, item 11 – label U Forestry managed investment scheme deduction for more information on amounts that the fund can deduct.

The amount of the fund’s incidental forestry scheme receipts is the total of all the amounts that it received from the FMIS in each income year that it held its forestry interest, other than amounts received because of a CGT event, that is, a sale or a harvest.

Initial participant in an FMIS

Thinning receipts

If the fund received thinning proceeds from its forestry interest, include at label X the actual amount received.

Sale and harvest receipts: forestry interest no longer held

Include at label X the market value of the forestry interest at the time of the CGT event if the fund:

• ceased holding its forestry interest as a result of a CGT event (because it sold its interest or it received harvest proceeds), and
• has deducted or can deduct amounts paid under the FMIS in relation to the forestry interest or would be entitled to deduct such amounts but for a CGT event happening within 4 years after the end of the income year in which the fund first pays an amount under the FMIS.

Sale and harvest receipts: forestry interest still held

Include at label X the amount by which the market value of the forestry interest was reduced as a result of the CGT event if:

• a CGT event happened and the fund still holds its forestry interest (because it sold part of its interest or it received harvest proceeds), and
• the fund has deducted or can deduct amounts paid under the FMIS in relation to the forestry interest or would be entitled to deduct such amounts but for a CGT event happening within 4 years after the end of the income year in which the fund first pays an amount under the FMIS.

Subsequent participant in an FMIS

Thinning receipts

If the fund received thinning proceeds from its forestry interest, include at label X the actual amount received.

Sale and harvest receipts: forestry interest no longer held

If:

• the fund ceased holding its forestry interest as a result of a CGT event (because it sold its interest or it received harvest proceeds), and
• the fund has deducted or can deduct or could have deducted an amount if the fund had paid the amount under the FMIS in relation to the forestry interest

then include at label X the lesser of the following 2 amounts:

• the market value of the forestry interest at the time of the CGT event, or
• the amount (if any) by which the total forestry scheme deductions exceed the incidental forestry scheme receipts ('net deductions').

Example 1 shows how to calculate the amount to include at label X where the fund sold its forestry interest, and the capital gains tax consequences.

Sale and harvest receipts: forestry interest still held

If:

• a CGT event happened and the fund still holds its forestry interest (because it sold part of its interest or it received harvest proceeds), and
• the fund can deduct or has deducted or could have deducted an amount if the fund had paid the amount under the FMIS in relation to the forestry interest,

then work out the lesser of the following 2 amounts:

• the market value of the forestry interest at the time of the CGT event, and
• the amount (if any) by which the total forestry scheme deductions exceed the incidental forestry scheme receipts ('net deductions').

Use the following formula:

Lesser of 2 amounts above × the decrease (if any) in the market value of the forestry interest (as a result of the CGT event) ÷ the market value of the forestry interest just before the CGT event

Include at label X the amount calculated using the formula.

In a future income year in which the fund receives further proceeds from a harvest or the sale of its forestry interest, disregard the amount of the 'net deductions' that has already been reflected at label X.

Example 2 shows how to calculate the amount to include at label X where there is a harvest payment made and the fund still holds the forestry interest, and the CGT consequences.

To complete this item

Add up all the amounts you worked out for each FMIS in which the fund holds a forestry interest and write the total at label X.

For how to calculate the amount you show at label X where the fund is a subsequent participant that holds the forestry interest on capital account, see Example 1 and Example 2.

For more information on the CGT treatment of a fund’s forestry interest, see the Guide to capital gains tax 2023.

D1 Gross foreign income

Show at label D1 the gross assessable income derived by the fund from foreign sources, grossed up by the amount of the foreign tax withheld or paid at source on that income. Include dividends (for example, New Zealand franking company dividends and supplementary dividends), interest, and attributable income though the controlled foreign company (CFC) regime.

Show at label D1 any foreign source income included in the fund’s share of net income from:

• a trust
• any foreign source income received from a partnership
• distributions received from foreign corporate limited partnerships, foreign hybrid limited partnerships and foreign hybrid companies.

Do not include this amount at item 10 – labels:

• I Gross distribution from partnerships
• Q Trust distributions other amounts.

Any foreign source income included in the fund’s share of net income from a trust that the fund is unable to report on a gross basis can be included at label D1 on a net basis.

If the TOFA rules apply to the fund, include gross foreign income from financial arrangements subject to the TOFA rules at label D1.

Do not reduce gross foreign income by exempt current pension income. Show exempt current pension income at item 10 – label Y Exempt current pension income.

Do not show at label D1:

• any Australian franking credits attached to New Zealand franking company dividends – show these at item 10 – label E Australian franking credits from a New Zealand company
• foreign exchange gains and losses; such gains and losses (from both foreign and domestic sources) – show at item 10 – label G Foreign exchange gains or at item 11 – label R Foreign exchange losses, as appropriate
• foreign income to the extent it is non-arm's-length income of a complying superannuation fund, complying ADF or a PST – show this amount at label U Net non-arm’s length income
• foreign source capital gains and losses; net capital gains – show at item 10 – label A Net capital gain.
  An Australian superannuation fund makes a capital gain or capital loss if a CGT event happens to any of its worldwide CGT assets. A fund that is not an ‘Australian superannuation fund’ makes a capital gain or loss, generally speaking, if the CGT asset is taxable Australian property just before the CGT event happens.

For more information, see:

• Foreign income return form guide
• Guide to capital gains tax 2023

The fund may need to complete a Losses schedule 2023. For more information, see Who must complete a Losses schedule?.

D Net foreign income

Show at label D the gross foreign income amount shown at label D1, net of expenses incurred in deriving that income, and subtract any foreign source losses incurred in 2022–23 (not CGT losses).

If the total amount at label D is a negative value, print L in the Loss box.

If the fund received franked dividends directly or indirectly from a New Zealand franking company, see Trans-Tasman imputation.

Do not subtract debt deductions in calculating net foreign income at label D, except where they are attributable to an overseas permanent establishment of the fund. Show the debt deductions, which are not attributable to an overseas permanent establishment of the fund, at item 11 Deductions, as relevant, at labels:

• A Interest expenses within Australia
• B Interest expenses overseas
• I Investment expenses
• J Management expenses
• Q Administration expenses
• L Other deductions.

Do not reduce net foreign income by exempt current pension income. Exempt current pension income is shown at item 10 – label Y Exempt current pension income.

Do not show at label D:

• foreign exchange gains and losses; such gains and losses (from both foreign and domestic sources) should be shown at item 10 – label G Foreign exchange gains or at item 11 – label R Foreign exchange losses, as appropriate
• net foreign source capital gains, this should be shown at item 10 – label A Net capital gain
• net foreign income to the extent it is non-arm’s length income of a complying superannuation fund, complying ADF or a PST; show this at item 10 – label U Net non-arm’s length income.

Complete and attach a Losses schedule 2023, if the fund has:

• total tax losses and net capital losses carried forward to later income years greater than $100,000
• an interest in a controlled foreign company (CFC) that has 2022–23 losses greater than $100,000
• an interest in a CFC that has deducted or carried forward a loss to later income years greater than $100,000.

If the TOFA rules apply to the fund, include net foreign income from financial arrangements subject to the TOFA rules at label D.

E Australian franking credits from a New Zealand company

Dividends paid by New Zealand resident companies that have chosen to join the Australian imputation system may also carry franking credits.

Did the fund receive assessable franked distributions from a New Zealand franking company directly or indirectly through a partnership or trust?

To work out whether the distribution is assessable, see the Foreign income return form guide.

You must reduce the Australian franking credits that the fund received directly or indirectly from a New Zealand franking company by:

• the amount of a supplementary dividend, or
• the fund’s share of a supplementary dividend

if

• the supplementary dividend is paid in connection with the franked dividend, and
• the fund is entitled to a foreign income tax offset because the franked dividend is included in the fund’s assessable income.

If the shares or interests are not held at risk as required under the holding period and related payments rules, or there is other manipulation of the imputation system, do not include the Australian franking credit in assessable income at label E and there is no entitlement to a franking tax offset.

Show the amount of Australian franking credits included in assessable income at item 12 Calculation statement – label:

• C2 Rebates and tax offsets for a non-complying fund
• E1 Complying fund's franking credits tax offset for a complying fund or PST.

A dividend from a New Zealand franking company may also carry New Zealand imputation credits. An Australian resident cannot claim New Zealand imputation credits.

If the franking credit is attached to a dividend that is non-arm’s length income of a complying superannuation fund, complying ADF or a PST, show the franking credit (along with the dividend) at item 10 – label U Net non-arm’s length income.

F Transfers from foreign funds

Show at label F all assessable amounts arising from amounts transferred to an Australian superannuation fund from a foreign superannuation fund.

Include at label F so much of the amounts transferred that were in excess of what was vested in the member at the time of the transfer (see subsection 295-200(1) of the ITAA 1997).

Also include at label F so much of the amounts transferred to a complying superannuation fund from a foreign superannuation fund that the former member of the foreign fund has specified in a written choice to have included in the fund's assessable income (see section 305-80 and subsection 295-200(2) of the ITAA 1997).

The amount is included in the income year in which the transfer happens.

Print in the Number box the number of transfers received from foreign superannuation funds for the income year.

For more information, see Tax treatment of transfers from foreign super funds.

H Gross payments where ABN not quoted

Show at label H the gross value of all payments made to the fund that had amounts withheld because an ABN was not quoted. That is, show at label H the gross payment amount for any corresponding credit you show at item 12 Calculation statement – label H3 Credit for tax withheld – where ABN or TFN not quoted (non-individual).

Gross payments include both the amounts paid to the fund and the amounts withheld from these payments.

Complete and attach a Non-individual PAYG payment summary schedule 2023. For instructions on completing this schedule, see Schedules – PAYG payment summary – withholding where ABN not quoted.

Record keeping

Keep a record of the:

• full name of the payer
• TFN of the payer if known
• amount of income.

I Gross distribution from partnerships

Show at label I the gross distribution from all partnerships. If the amount is a loss, print L in the Loss box at the right of the amount.

Do not show non-arm's length income of a complying superannuation fund or a complying ADF or PST. Show that amount at label U Net non-arm’s length income.

If the distribution includes an amount of foreign income, including New Zealand franking company dividends and supplementary dividends, do not include it at label I. Show that amount at label D1 Gross foreign income and take it into account when calculating label D Net foreign income.

Include:

• any amount subject to foreign resident withholding in Australia that were distributed to the fund from a partnership
• the fund’s share of credit from foreign resident withholding.

You can claim a credit for the fund’s share of credit from foreign resident withholding in the calculation statement at item 12 Calculation statement – label H2 Credit for tax withheld – foreign resident withholding (excluding capital gains).

If a distribution includes franked dividends (including franked non-share dividends), determine the fund's entitlement to a franking credits tax offset.

The fund is not entitled to a franking credits tax offset if:

• the relevant interest is not held at risk as required under the holding period rule
• the dividend washing integrity rule applies
• there is some other manipulation of the imputation system (the Commissioner may make a determination to deny imputation benefits where you have entered into a scheme for a non-incidental purpose of obtaining franking credit benefits)
• the gross distribution from the partnership is exempt income or non-assessable non-exempt income (other than a distribution exempted from income tax under the exempt current pension income (ECPI) rules, see item 10 – label Y Exempt current pension income).

If the fund is entitled to a franking credits tax offset, 'gross up' the franked dividend distribution to include the fund’s share of any attached franking credits. Show all grossed up distributions at label I.

Show the fund’s share of the franking credits attached to such dividend distributions at item 12 – label:

• E1 Complying fund's franking credits tax offset, if the fund is a complying superannuation fund, complying ADF or PST
• C2 Rebates and tax offsets, if the fund is a non-complying superannuation fund or non-complying ADF.

If the fund is not entitled to a franking credits tax offset, show only the amount of the franked dividend at label I. Do not show the franking credit attached to the dividend anywhere in the Fund income tax return.

To the extent the fund’s share of partnership income includes an amount on which family trust distribution tax (FTDT) has been paid, do not include that amount in the fund’s assessable income (section 271-105 in Schedule 2F to the Income Tax Assessment Act 1936 (ITAA 1936)).

To the extent the fund’s share of partnership income includes an amount received indirectly from a closely held trust on which trustee beneficiary non-disclosure tax (TBNT) has been paid, do not include that amount in the fund’s assessable income.

Any losses or outgoings that the fund incurred in deriving an amount that is excluded from assessable income because FTDT or TBNT has been paid are not deductible.

The fund cannot claim a franking credit tax offset for any franking credits attributable to the whole or a part of a dividend that is excluded from assessable income because FTDT or TBNT has been paid.

If the TOFA rules apply to the fund, include gross distributions from partnerships from financial arrangements subject to the TOFA rules at label I.

New rules applying to stapled structures took effect from 1 July 2019. Amounts at this item may now include Non-concessional MIT income (NCMI) or Excluded from non-concessional MIT income.

For more information about NCMI, see Stapled structures.

Record keeping

Keep a record of the:

• full name of the partnership
• TFN of the partnership if known
• amount of income.

Notes for completing J Unfranked dividend amount, K Franked dividend amount, L Dividend franking credit

Labels J, K and L refer to dividends derived from investments in resident entities (Australian payers), including listed investment companies.

Dividends or non-share dividends that the fund receives from Australian payers may carry franking credits. Such dividends are called franked dividends, and the franking credits they carry reflect the amount of tax paid by the payer.

Dividends and non-share dividends where no tax has been paid are called unfranked dividends.

Add all the franked and unfranked dividend amounts received and all the franking credits to determine the fund’s assessable income from these dividends.

Non-share dividends are treated in the same way as dividends. Show the amount of the non-share dividends, whether franked or unfranked, and any amount of franking credit attached to those dividends, at the appropriate place on the tax return as if they were for shares.

Non-share dividends are returns paid on non-share equity interests. These interests are not shares in legal form but are treated in the same way as shares under the debt and equity rules. Guide to the debt and equity tests provides an overview of the debt and equity rules and explains what a non-share equity interest is.

To the extent that FTDT has been paid on a dividend (including a non-share dividend) paid or credited to the fund by a company that has made an interposed entity election, do not include in the assessable income of the fund the amount that is made not assessable income and not exempt income by section 271-105 in Schedule 2F to the ITAA 1936.

• Any losses or outgoings that the fund incurred in deriving an amount that is excluded from assessable income because FTDT has been paid are not deductible.
• The fund cannot claim a franking credit tax offset for any franking credit attributable to the whole or a portion of a dividend that is excluded from assessable income because FTDT has been paid.

If a complying superannuation fund, complying ADF or a PST received a dividend from a private company, you must establish whether the dividend is non-arm's length income. If the dividend is non-arm's length income, show the dividend amount (along with any attached franking credit for which the fund is entitled to a franking credit tax offset) at U Net non-arm’s length income.

For more information, see TR 2006/7 Income tax: special income derived by a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust in relation to the year of income.

Dividends that form part of a share of net income from trusts must be shown at labels N or O and P and not at J, K or L (unless it is non-arm’s length income in which case it is included at label U Net non-arm’s length income).

Dividends that form part of a partnership distribution are shown at labels I and not at J, K or L (unless it is non-arm’s length income in which case it is included at label U Net non-arm’s length income).

J Unfranked dividend amount

Show at label J the total amount of unfranked dividends and unfranked non-share dividends that the fund received.

Do not show at label J:

• unfranked distributions from a New Zealand franking company; show them at item 10 – labels D1 Gross foreign income and D Net foreign income
• the unfranked part of a distribution from a pooled development fund (PDF). The unfranked part of the distribution is exempt from income tax and is not included in the fund’s assessable income. However, this amount of exempt income must be taken into account when working out the amount of the fund’s tax loss at item 11 Deductions – label M Tax losses deducted.

If the TOFA rules apply to the fund, include unfranked dividends from financial arrangements subject to the TOFA rules at label J.

K Franked dividend amount

Show at label K the total amount of franked dividends and franked non-share dividends that the fund received.

Do not show at label K:

• franking credits attached to the dividends included at label K; show these at label L
• franked dividends that the fund received from a New Zealand franking company; show these at item 10 – labels D1 Gross foreign income and D Net foreign income.

The franked part of a distribution from a PDF is exempt from income tax, unless you elect to include the amount in the fund’s assessable income. In that case, the franked part of the distribution and the franking credit on the distribution worked out in accordance with Subdivision 207-A of the ITAA 1997, are included in the fund’s assessable income. Show the franked part of the distribution at label K and the attached franking credit at label L. If you did not make such an election do not show the franked part of the distribution at label K or the attached franking credit at label L.

If the fund qualifies for a venture capital franking credits tax offset, so much of the franked part of the distribution that is franked with a venture capital credit is exempt from income tax. You cannot elect to include this amount in the fund's assessable income; do not show it at label K. However, the fund may claim a tax offset in relation to a distribution franked with a venture capital credit even though the distribution is exempt from income tax. The tax offset is included at item 12 Calculation statement – label C2 Rebates and offsets.

The amount of exempt income must also be taken into account when working out the amount of the fund’s tax loss at item 11 Deductions – label M Tax losses deducted.

L Dividend franking credit

Show at label L the total amount of the franking credits attached to franked dividends and franked non-share dividends:

• that the fund received, and
• for which the fund is entitled to a franking credits tax offset.

Do not show franking credits at label L if:

• the fund did not satisfy the holding period rule or the related payments rule in relation to the dividend
• the dividend washing integrity rule applies, or
• there is some other manipulation of the imputation system. The Commissioner may make a determination to deny imputation benefits where you have entered into a scheme for a non-incidental purpose of obtaining franking credit benefits.

Franking credits reduce the amount of tax that the fund owes. Generally, franking credits in excess of the tax payable will be refunded if the fund is a complying superannuation fund, complying ADF or PST.

Show the amount of franking credits attached to franked dividends and franked non-share dividends that the fund received at item 12 – label:

• E1 Complying fund's franking credits tax offset, if the fund is a complying superannuation fund, complying ADF or PST
• C2 Rebates and offsets, if the fund is a non-complying superannuation fund or a non-complying ADF.

If the franking credit is attached to a franked dividend that is non-arm's length income of a complying superannuation fund, complying ADF or PST, do not show the franking credit at label L. Include the franking credit (and the dividend amount) at label U Net non-arm’s length income.

Do not show at label L franking credits attached to assessable dividends received directly or indirectly from a New Zealand franking company. Include these at label E Australian franking credits from a New Zealand company.

If you elect to include the franked part of a distribution from a PDF in the fund’s assessable income, you must also include the franking credit on the distribution (worked out in accordance with Subdivision 207-A of the ITAA 1997) in the fund’s assessable income. Show the franking credit at label L and the franked part of the distribution at label K.

If you did not elect to include the franked part of a distribution from a PDF in the fund’s assessable income, do not show the franking credit at label L or the franked part of the distribution at label K.

Distributions from trusts

The fund’s share of net income from trusts may include foreign income, capital gains, unfranked distributions, franked distributions, and franking credits referable to these distributions and other amounts.

Show the different components of the net income from trusts as follows:

• foreign income, including New Zealand franking company dividends and supplementary dividends, at D1 Gross foreign income and take it into account in calculating D Net foreign income unless it is non-arm’s length income of a complying superannuation fund, complying ADF or a PST, in which case include it at label U Net non-arm’s length income
• capital gains at A Net capital gain unless and to the extent that the net capital gain reflects a non-arm’s length capital gain in which case show it at label U Net non-arm’s length income; for information on how to show a capital gain received from a trust at A, for example, how to gross up a trust capital gain, see the Guide to capital gains tax 2023
• other amounts at labels N Trust distributions unfranked amount to Q Trust distributions other amounts    
  • any amount you show at labels N to Q cannot be a loss
  • income from stapled securities received as trust distributions is shown at labels N to Q as appropriate.

Include at label Q any amounts of Non-concessional MIT income (NCMI) or Excluded from non-concessional MIT income. New rules applying to stapled structures took effect from 1 July 2019. For more information about NCMI, see Stapled structures.

Share of credits

Show at item 12 Calculation statement – label H2 Credit for tax withheld – foreign resident withholding (excluding capital gains) the fund’s share of any foreign resident withholding credits received from trusts. Do not include credits for foreign resident capital gains withholding amounts. Include this amount at label H8.

Show at item 12 – label H3 Credit for tax withheld – where ABN or TFN not quoted (non-individual) the fund’s share of any credit for TFN amounts withheld from interest, dividends or income of a unit trust to which the fund was presently entitled from another trust.

Show at item 12 – label H5 Credit for TFN amounts withheld from payments from closely held trusts any amounts withheld by a trustee of a closely held trust because the fund had not provided its TFN to the trustee.

Show at item 12 – label H8 Credit for foreign resident capital gains withholding amounts any amounts withheld from the sale proceeds of certain taxable Australian property where the vendor is a foreign resident and no exclusion applies.

Non-arm’s length income

Determine whether any share of net income from a trust is:

• from a trust in which the fund does not have a fixed entitlement to income,
• from a trust in which the fund does have a fixed entitlement to income and the entitlement or income is part of 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 (for more information, see TR 2006/7), or
• from a trust in which the fund does have a fixed entitlement to income, where the fund    
  • acquired the entitlement under a scheme or the income was derived under a scheme in which parties weren't dealing with each other at arm's length, and
  • incurred expenses in acquiring the entitlement or deriving the income that are less than, including a nil amount, what the fund would otherwise have been expected to incur if the parties were dealing on an arm's length basis (for more information, see LCR 2021/2 and PCG 2020/5).

If any of these dot points apply to the share of net income from a trust, do not show the share of net income from this trust at N to Q. Show the amount at U Net non-arm’s length income.

Do not show distributions from PSTs at N to Q.

Family trust distribution tax (FTDT) and trustee beneficiary non-disclosure tax (TBNT)

To the extent that FTDT has been paid on income or capital included in the fund’s share of net income from a trust, do not include in the fund’s assessable income the amount that is made not assessable income and not exempt income by section 271-105 in Schedule 2F to the ITAA 1936.

To the extent the fund’s share of net income from a trust includes an amount on which TBNT has been paid, do not include that amount in the fund’s assessable income.

Any losses or outgoings that the fund incurred in deriving an amount that is excluded from assessable income because FTDT or TBNT has been paid are not deductible.

The fund cannot claim a franking credit tax offset for any franking credits attributable to the whole or a part of a dividend that is excluded from assessable income because FTDT or TBNT has been paid.

Include all of the net income from trusts at the relevant labels from N to Q even if the fund is subject to the TOFA rules and even if the amounts are derived in respect of financial arrangements.

N Trust distributions unfranked amount

Show at label N the total amount of unfranked dividends and unfranked non-share dividends included in the fund’s share of net income from trusts.

O Trust distributions franked amount

Show at label O the total amount of franked distributions included in the fund’s share of net income from trusts. Do not show at label O the fund’s share of franking credits attached to a franked distribution – show these at label P.

P Trust distributions franking credit

Show at label P the total amount of franking credits attached to franked distributions included in the fund's share of net income from trusts.

Do not show franking credits attached to franked distributions received through a trust if one of the following applies:

• the franking credits were attributable to a distribution from a New Zealand franking company; if the fund received franking credits indirectly from a New Zealand franking company, see label E Australian franking credits from a New Zealand company
• the holding period rule or related payments rule were not satisfied in relation to the dividend
• the fund’s share of net income from the trust includes dividends paid or credited by a company that has made an interposed entity election and FTDT has been paid; the dividend is excluded from assessable income under section 271-105 in Schedule 2F to the ITAA 1936 and a franking credit or tax offset cannot be claimed for any franking credit attached to that dividend
• the dividend washing integrity rule applies
• there is some other manipulation of the imputation system - the Commissioner may make a determination to deny imputation benefits where you have entered into a scheme for a non-incidental purpose of obtaining franking credit benefits
• the franked distribution from the trust is exempt income or non-assessable non-exempt income of the fund, other than a distribution that is exempt from income tax under the exempt current pension income (ECPI) rules; see label Y Exempt current pension income.

If the fund is entitled to a franking credits tax offset, show the fund’s share of the franking credits attached to such franked distributions at item 12 Calculation statement – label:

• E1 Complying fund's franking credits tax offset, if the fund is a complying superannuation fund, complying ADF or PST
• C2 Rebates and tax offsets, if the fund is a non-complying superannuation fund or non-complying ADF.

If the fund is not entitled to a franking credits tax offset, do not show the franking credit attached to the dividend anywhere in the Fund income tax return.

Q Trust distributions other amounts

Show at label Q the total amount of the fund’s share of net income from trusts that is not included at:

• labels N to P (Trust distributions unfranked amount, Trust distributions franked amount or Trust distributions franking credit), or
• any other label in the return.

Show at label Q any amounts of interest income and rental income that were included in a fund's share of net income from a trust.

Record keeping

Keep a record of the:

• full name of the trust
• TFN of the trust
• amount of income.

R Assessable contributions

Show at label R the total assessable contributions received by the fund for 2022–23.

Calculate the amount at item 10 – label R by adding the amounts at labels:

• R1 Assessable employer contributions
• R2 Assessable personal contributions
• R3 No-TFN-quoted contributions.

Then deduct the amounts at labels:

• R4 Contributions excluded by trustee
• R5 Pre 1 July 1988 funding credits
• R6 Transfer of liability to life insurance company or PST.

Do not include at label R the following contributions (because they do not form part of the fund’s assessable income):

• super co-contributions and low income super tax offset made under the Superannuation (Government Co-contribution for Low Income Earners) Act 2003
• contributions for a person under 18 that are not made by, or on behalf of, the person’s employer
• payments by a member of another superannuation fund to a regulated superannuation fund to be held for the benefit of their former spouse (sometimes referred to as ‘member spouse contributions’) where there is a splitting of a superannuation interest due to marriage or relationship breakdown
• spouse contributions for which the contributor cannot claim a deduction
• a contribution made to a life insurance company or a PST by an entity that was a trustee of a complying superannuation fund, a complying ADF or a PST when the contribution was made.

A spouse of a member includes another person (of any sex) who:

• the member was in a relationship with, that was registered under a prescribed state or territory law, or
• although not legally married to the member, lived with the member on a genuine domestic basis in a relationship as a couple.

Generally, the liability for tax on contributions lies with the trustee of a fund receiving the contributions. Complying superannuation funds, non-complying superannuation funds that are Australian superannuation funds and ADFs can apply the deduction provisions as if all contributions made to them are included in assessable income. However, other superannuation funds may only be entitled to a deduction for the cost of collecting assessable contributions.

Show the deductions allowable against contributions at the appropriate labels in Section C: Deductions.

R1 Assessable employer contributions

Show at label R1 the total of assessable contributions and payments received by the fund from someone other than the member (such as their employer) in 2022–23.

Include:

• all contributions for a member paid by an employer (including amounts contributed under effective salary sacrifice arrangements) or by another third party to a complying superannuation fund, or to a non-complying superannuation fund where that fund is an Australian superannuation fund
• all contributions for a member paid by an employer (including amounts contributed under effective salary sacrifice arrangements) or by another third party to a superannuation fund that is not an Australian superannuation fund that relate to a period when the member was an Australian resident, or was a foreign resident deriving employment or similar income, such as salary or wage income, that is subject to Australian withholding payment rules
• shortfall amounts paid by us to a complying superannuation fund or a complying ADF under the provisions of the Superannuation Guarantee (Administration) Act 1992
• amounts transferred by us from the Superannuation Holding Accounts Special Account to a complying superannuation fund under the provisions of the Small Superannuation Accounts Act 1995, other than amounts that represent super co-contributions or low income super tax offset.

If the fund is a non-complying foreign superannuation fund do not include at label R1 contributions made for an employee who is a temporary resident at the end of the income year to which the contribution relates.

Do not include at label R1 contributions received for a member who has not quoted their TFN. Show these contributions at label R3 No-TFN-quoted contributions.

Label R1 is used to determine label R Assessable contributions.

R2 Assessable personal contributions

Show at label R2 the total of assessable personal contributions.

Personal contributions are assessable contributions of a complying superannuation fund only if the contributor has provided a valid notice stating their intent to claim a deduction for their contributions and the trustee has acknowledged receipt of the notice.

A rollover superannuation benefit is also assessable to a fund (as a successor fund) to the extent that the benefit relates to a contribution that was not covered by a valid and acknowledged deduction notice given to the transferring fund, but for which the successor fund holds a valid deduction notice that the trustee of the successor fund has acknowledged.

The contribution or benefit is included in the income year in which it is received if the notice is received by the time the fund lodges its income tax return for that income year. Otherwise the contribution is included in the income year in which the notice is received.

If the fund receives a notice varying the amount of a previous valid Notice of intent to claim a deduction for personal super contributions before the fund lodges its tax return for that income year, show at label R2 the reduced amount of the contribution or benefit.

If the fund receives a notice varying the amount of a previous valid notice of intent to claim a deduction for personal super contributions after it has lodged its tax return for the income year that included the contribution as assessable income it can either:

• amend the tax return for the income year in which it included the contribution as assessable income
• deduct an amount in the income year it received the notice varying the amount, see, item 11 Deductions – label L Other deductions.

Other amounts that are included in the fund’s assessable income at label R2 include:

• the untaxed element, up to the untaxed plan cap amount ($1.65 million in 2022–23) of a rollover superannuation benefit (it is included in the income year in which it is received by the fund)
• the untaxed element of the rollover superannuation benefits that are taken to be paid to a complying superannuation fund as a result of the complying superannuation fund ceasing to be a constitutionally protected fund during the income year or at the end of the previous income year.

Label R2 is used to determine label R Assessable contributions.

R3 No-TFN-quoted contributions

Show at label R3 all contributions received that were for a member who has not quoted a TFN, unless the member's account was opened before 1 July 2007 and the member's total assessable contributions for the income year are $1,000 or less. If this exception applies, report employer contributions for the member at label R1, even though the member has not quoted their TFN to the fund.

Label R3 is mandatory. You must include an amount at label R3, even if it is zero (if zero write 0).

The fund will be liable for additional tax on no-TFN-quoted contributions. For a complying superannuation fund, the additional tax is 32% (that is, in addition to 15%). For a non-complying superannuation fund, the additional tax is 2% (that is, in addition to the 45% tax). The effect of the additional tax is that the no-TFN-quoted contribution is subject to an overall tax rate of 47%. This additional tax must be paid regardless of any tax offsets or amounts the fund may have transferred to a life insurance company or PST; see label R6 Transfer of liability to life insurance company or PST.

For an illustration of how this additional tax is applied, see Example 4.

Label R3 is used to determine label R Assessable contributions.

Show additional tax payable as a result of a member not quoting a TFN at item 12 – label J Tax on no-TFN-quoted contributions.

If a member quotes their TFN to the fund in 2022–23 for the first time, and the fund paid additional tax on no-TFN-quoted contributions in one of the most recent 3 income years ending before 2022–23, in relation to that member not having quoted, then a tax offset can be claimed at item 12 – label E2 No-TFN tax offset for that additional tax.

R4 Contributions excluded by trustee

Show at label R4 the contributions the trustee of a public sector superannuation scheme, with the contributor’s consent, chooses not to include in its assessable income (under section 295-180 of the ITAA 1997). The amount of contributions that the choice can cover is limited to the sum of amounts covered by notices given by the trustee under section 307-285 of the ITAA 1997 for superannuation benefits paid in the income year. The choice cannot be revoked or withdrawn.

A choice cannot be made in relation to a public sector superannuation scheme that came into operation after 5 September 2006.

Label R4 is used to determine label R Assessable contributions.

R5 Pre 1 July 1988 funding credits

Show at label R5 the amount by which the fund (if it is a complying superannuation fund) chooses to reduce contributions, which would otherwise be included in its assessable income, through applying available pre-1 July 1988 funding credits (section 295-265 of the ITAA 1997).

Subsection 295-265(2) sets out the methodology to determine whether funding credits are available. Subsections 295-265(5) and (6) limit the amount of funding credits that can be used.

Label R5 is used to determine label R Assessable contributions.

R6 Transfer of liability to life insurance company or PST

Show at label R6 the amount, which would otherwise have been included in the fund’s assessable income for the income year under Subdivision 295-C of the ITAA 1997, that the trustee of the complying superannuation fund or a complying approved deposit fund (the ‘transferor’) has agreed to transfer to a life insurance company or PST (the 'transferee') pursuant to an agreement with that transferee entity. The amount of the income transferred is included in the transferee entity’s assessable income instead.

The fund (transferor) must hold sufficient investments in a transferee entity to cover the tax payable by the transferee entity as a result of the transfer.

The total amount transferred by the fund under all such agreements cannot exceed the amount that would otherwise have been included in the fund’s assessable income under Subdivision 295-C of the ITAA 1997.

The agreement to transfer must be in writing, signed by both parties, must be made before the lodgment of the fund’s tax return, and cannot be revoked. The trustee can only make one agreement for an income year with a particular transferee.

Superannuation funds cannot transfer the tax liability on no-TFN contributions income to a life insurance company or a PST. This is the case even if the fund has agreed to transfer 100% of the amount that would otherwise have been included in the fund’s assessable income for the income year under Subdivision 295-C of the ITAA 1997.

Label R6 is used to determine label R Assessable contributions.

Record keeping

Keep all relevant documents as evidence of the transferee’s consent to accept the transfer of assessable contributions and the associated tax liability.

G Foreign exchange gains

Show at label G assessable foreign exchange gains (from both foreign and domestic sources) made by the fund.

If the TOFA rules apply to the fund, include all assessable foreign exchange gains from financial arrangements subject to the TOFA rules at label G.

S Other income

Show at label S the assessable amount of any income received that does not fall into any of the other categories shown at item 10 – labels A to U. Other income may include, but is not limited to, the following categories.

• Taxation of financial arrangements
• Listed investment company (LIC) capital gain amount
• Assessable balancing adjustment amounts
• Rebate or refund of premium paid to provide death or disability benefits
• Gross payments subject to foreign resident withholding in Australia

Taxation of financial arrangements

If the TOFA rules apply to calculate an assessable gain or deductible loss on the fund’s financial arrangements, include at label S any assessable TOFA gains relating to the financial arrangements.

TOFA amounts that have been included elsewhere should not be included here. For example, amounts that have already been included at item 10 – labels:

• C Gross interest
• D1 Gross foreign income
• D Net foreign income
• I Gross distribution from partnerships
• J Unfranked dividend amount
• N Trust distributions unfranked amount
• Q Trust distributions other amounts
• G Foreign exchange gains.

If what you show at label S or elsewhere in Section B: Income includes an amount brought to account under the TOFA rules, also complete item 16 Taxation of financial arrangements (TOFA).

For more information, see Guide to the taxation of financial arrangements (TOFA).

Listed investment company (LIC) capital gain amount

If a complying superannuation fund, complying ADF or PST received a distribution from a partnership or a share of net income from a trust, and that partnership or trust claimed a deduction for a LIC capital gain amount, then the superannuation fund, ADF or PST must add back one-third of its share of the deduction claimed by the partnership or trust and include the amount at label S.

If a non-complying superannuation fund or non-complying ADF received a distribution from a partnership or a share of net income from a trust, and that partnership or trust claimed a deduction in respect of a LIC capital gain amount, then the non-complying superannuation fund or non-complying ADF must add back its share of the deduction claimed by the partnership or trust and include the amount at label S.

Assessable balancing adjustment amounts

If the superannuation entity ceases to hold or to use a depreciating asset, it will need to calculate a balancing adjustment amount to include at label S as assessable income or to claim as a deduction at item 11 Deductions – label L Other deductions. For more information, see the Guide to depreciating assets 2023.

Rebate or refund of premium paid to provide death or disability benefits

Show at label S rebates and refunds of insurance premiums received by a complying superannuation fund and attributable to amounts that the fund had previously deducted for insurance premiums to provide:

• superannuation death benefits
• benefits payable because of the existence of a terminal medical condition
• disability superannuation benefits
• benefits payable because of a person's temporary inability to engage in gainful employment.

Only the part of the rebate or refund attributable to the amount deducted is included in the fund's assessable income.

Gross payments subject to foreign resident withholding in Australia

Show at label S gross payments made to the fund that are subject to foreign resident withholding in Australia. Gross payments includes amounts of tax withheld.

Only include such income at label S if the fund is a foreign resident.

If you show a credit for tax withheld at item 12 Calculation statement – label H2 Credit for tax withheld – foreign resident withholding (excluding capital gains) you must show the corresponding gross payment at label S (unless it is already included at either label I Gross distribution from partnerships or Q Trust distributions other amounts).

A payment may be required to be shown at label S even if the credit for tax withheld is nil.

Do not include at label S:

• gross distributions of payments subject to foreign resident withholding in Australia that were distributed to the fund from partnerships and trusts. Instead, include the distributions from partnerships at label I Gross distribution from partnerships and include the share of net income from trusts at label Q Trust distributions other amounts.
• payments where the amount of foreign resident withholding was varied to nil because the income was not taxable under a double tax agreement.

If you show gross payments at label S, complete and attach a Non-individual PAYG payment summary schedule 2023.

For instructions on completing this schedule, see Non-individual PAYG payment summary schedule.

Gross distributions of payments prescribed for foreign resident withholding purposes from a partnership or trust do not have an associated payment summary.

Print in the Code box the code from table 3 that best describes the largest amount included at label S.

T Assessable income due to changed tax status of fund

Show at label T the amount that is to be included in the fund’s assessable income as a result of a change in tax status of the fund.

A fund that changes from complying to non-complying, or a fund that changes from being a foreign fund to an Australian superannuation fund, must calculate the amount of ordinary income and statutory income from previous income years using the appropriate formula below. The amount calculated is included at label T in the income year that the status of the fund changed.

A change in compliance or residency status for a fund may result in changes in tax rates which apply to the taxable income of the fund. Find out about when:

• The fund became a non-complying fund during the year
• The fund was, but no longer is, a foreign fund

The fund became a non-complying fund during the year

If during the income year the fund changed from being a complying superannuation fund to a non-complying superannuation fund, the fund’s assessable income for that income year includes its ordinary income and its statutory income from previous income years, as calculated using formula A.

In effect, the fund loses the benefit of tax concessions that it obtained as a complying superannuation fund.

Formula A

Asset value − non-concessional contributions = assessable amount

where:

• asset value is the total of the market values of the fund’s assets immediately before the start of the income year in which the fund became non-complying, and
• non-concessional contributions (formerly referred to as ‘undeducted contributions’) is the total of    
  • the part of the crystallised undeducted contributions that relate to the period after 30 June 1983, and
  • the contributions segment for current members at the time that have not been, and cannot be, deducted.

Show at label T the amount calculated using formula A.

The fund was, but no longer is, a foreign fund

If a fund was a foreign superannuation fund and became an Australian superannuation fund during the income year, its assessable income for that income year includes the amount calculated using formula B below:

Formula B

Asset value – member contributions = assessable amount

where:

• asset value is the total of the market values of the fund’s assets immediately before the start of the income year in which the fund became an Australian superannuation fund, and
• member contributions is the amount in the fund at that time representing contributions made by current members.

Show at label T the amount calculated using formula B.

The fund is not entitled to a tax offset (at item 12 Calculation statement – label C1 Foreign income tax offset) for foreign income tax paid before the start of the income year with respect to income reported at label T as a result of the change in the tax status of the fund.

U Net non-arm’s length income

Note: These instructions have been updated to reflect retrospective law changes for non-arm’s length expenses for superannuation entities. The changes apply from 1 July 2018 and are contained in Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Act 2024.

Write at label U the net amount of ordinary income and statutory income derived that is non-arm's length income.

This includes:

• private company dividends (including non-share dividends)
• income derived as a beneficiary of a trust other than holding a fixed entitlement to the income of the trust
• a net capital gain to the extent it reflects a non-arm’s length capital gain
• other non-arm’s length income that is greater than what might have been expected had the parties dealt with each other at arm’s length dealing including other non-arm’s length income derived as a beneficiary of a trust through holding a fixed entitlement to the income of the trust
• for regulated superannuation funds with no more than 6 members (4 members for 2019 to 2021 income years), also referred to as ‘small APRA regulated funds’ also include:
  • other non-arm's length income as a result of a loss, outgoing or expenditure that is non-arm’s length specific expenditure incurred (including a nil amount) in deriving the income that is less than that which might have been expected to be incurred if the parties were dealing with each other at arm's length.
  • other non-arm's length income, derived as a beneficiary of a trust through holding a fixed entitlement to the income of the trust, as a result of a loss, outgoing or expenditure that is non-arm’s length specific expenditure incurred (including a nil amount), in acquiring the entitlement or in gaining or producing the income, that is less than that which might have been expected to be incurred if the parties were dealing with each other at arm's length.

Don't include at label U:

• For small APRA regulated funds, any non-arm’s length income as a result of a non-arm’s length general expense. Non-arm’s length income as a result of a general expense is calculated using a 'Twice the difference approach'. Don't put this 'Twice the difference approach' amount at any label in Section B. Rather, this amount will be taken into account when calculating the ‘Tax on taxable income’ at label T1 in Section D.
• For large APRA funds, exempt public sector superannuation funds, pooled superannuation trusts (PSTs) and approved deposit funds (ADFs), any non-arm's length income arising from non-arm’s length expenses (both non-arm's length general and specific expenses).
• For all superannuation entities, any non-arm's length income arising from non-arm’s length expenses incurred or expected to have been incurred before 1 July 2018.

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.

The amounts deducted against the fund’s non-arm’s length income should not be shown in Section C: Deductions, except, for small APRA regulated funds, where the 'Twice the difference approach' applies as a result of a general expense being incurred. The actual amount of non-arm’s length general expense incurred which gave rise to the 'Twice the difference approach' is included as a deduction at the appropriate label in Section C – Deductions and non-deductible expenses, to the extent that is deductible.

Note: Due to retrospective law changes for non-arm’s length general expenses, label U may not align with the descriptor on the return form being ‘subject to 45% tax rate’. If the net amount of non-arm's length income is a loss, do not show the loss at label U. Quarantine the loss for future offset against future non-arm's length income. Keep a record of the quarantined loss amount with the fund’s tax records.

For more information, see:

• TR 2006/7 Income tax: special income derived by a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust in relation to the year of income
• LCR 2021/2 Non-arm's length income – expenditure incurred under a non-arm's length arrangement
• PCG 2020/5 Applying the non-arm's length income provisions to 'non arm's length expenditure' – ATO compliance approach for complying superannuation entities.

Non-arm’s length trust distributions

For all superannuation entities, a share of net income from a trust is non-arm's length income if:

• the fund, as a beneficiary of a trust, does not have a fixed entitlement to income from the trust (generally discretionary trusts), see subsection 295-550(4) of the ITAA 1997, or
• all of the following apply:    
  • the fund has a fixed entitlement to income from the trust
  • as a result of a scheme where the parties were not dealing with each other at arm's length, and
  • the fund’s share of the net income is more than it might have been expected to derive had the parties been dealing with each other at arm’s length; see subsection 295-550(5) of the ITAA 1997.

For small APRA funds, a share of net income from a trust is also non-arm's length income if:

• all of the following apply:
  • the fund has a fixed entitlement to income of the trust
  • as a result of a scheme where the parties were not dealing with each other at arm's length
  • in acquiring the entitlement or in gaining or producing the income, the fund incurs a loss, outgoing or expenditure (including a nil amount) that the fund might have expected to incur had the parties been dealing with each other at arm’s length; see subsection 295-550(5) of the ITAA 1997.

If the fund's share of net income includes franked dividends (or franked non-share dividends), gross up the share of net income by including the attached franking credits that the fund is entitled to and reduce this amount by any related deductions. Include the grossed up amount in the amount shown at label U.

To claim a franking credit tax offset for these franking credits, the fund includes the amount of franking credits at item 12 Calculation statement – label E1 Complying fund's franking credits tax offset.

If a share of net income includes a capital gain, calculate the capital gain as per the instructions at label A Net capital gain. To the extent the net capital gain reflects any non-arm’s length capital gain it should be shown at label U.

If you are a small APRA fund and you report a non-arm's length trust distribution at item 10 label U, complete a Trust income schedule 2024 and attach it to the fund income tax return.

For more information, see:

• Taxation Ruling TR 2006/7 Income tax: special income derived by a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust in relation to the year of income
• Law Companion Ruling LCR 2021/2 Non-arm's length income – expenditure incurred under a non-arm's length arrangement.

Non-arm’s-length private company dividends

A dividend paid by a private company, or ordinary income or statutory income that is reasonably attributable to such a dividend, is non-arm's length income of a complying superannuation fund, complying ADF or PST unless the amount is consistent with an arm's length dealing.

In deciding whether the amount is consistent with an arm’s length dealing, consideration must be given to:

• the value of the shares held by the fund or PST in the company
• the cost to the fund or PST of the shares on which the dividends were paid
• the dividend rate on those shares
• whether dividends have been paid on other shares in the company, and the dividend rate
• whether the company has issued shares in lieu of dividends to the fund or PST, and the circumstances of the issue
• any other relevant circumstances (which may include any connection between the private company and the fund or PST).

If private company dividends (including non-share dividends) are non-arm’s length income, gross up the amount of private company dividends (including non-share dividends) to include any attached franking credits and reduce this amount by any related deductions and include the result at label U.

For a complying superannuation fund, complying ADF or PST, include the amount of franking credits attached to such dividends at item 12 Calculation statement – label E1 Complying fund's franking credits tax offset.

If private company dividends (including non-share dividends) are consistent with an arm’s length dealing, such that the amount should not be treated as non-arm’s length income, show these dividends at item 10 either label:

• J Unfranked dividend amount, or
• K Franked dividend amount and L Dividend franking credit

or if applicable

• D Net foreign income and D1 Gross foreign income and E Australian franking credits from a New Zealand company.

Other types of income

For all superannuation entities, an amount of income is also non-arm’s length income if:

• the parties to a scheme were not dealing with each other at arm’s length in relation to the scheme, and
• the amount of income is greater than what might have been expected had the parties been dealing with each other at arm’s length in relation to the scheme. Whether that is the case depends on all of the circumstances of the relationship, including the return on the investment and the commercial risks undertaken by the fund.

For small APRA funds, an amount of income is also non-arm’s length income if:

• the parties to a scheme were not dealing with each other at arm’s length in relation to the scheme, and
• in gaining or producing the income, it incurs (including a nil amount) a loss, outgoing or expenditure that is less than what might have been expected to be incurred if the parties were dealing with each other at arm's length.

The expenses may be revenue or capital or of a capital nature.

W Gross income

Show at label W the total of all income from labels A to U (which includes income from label X).

Do not include any amount from the following because it would have already been included in the respective totals at labels D and R from:

• D1 Gross foreign income
• R1 Assessable employer contributions
• R2 Assessable personal contributions
• R3 No-TFN-quoted contributions
• R4 Contributions excluded by trustee
• R5 Pre 1 July 1988 funding credits
• R6 Transfer of liability to life insurance company or PST

Where there is no income, print 0 (zero) at label W. If the amount shown is a loss, print L in the box at the right of the amount.

Y Exempt current pension income

Show at label Y the exempt current pension income of a complying fund or PST.

Some or all of the ordinary income and statutory income of a complying superannuation fund or PST, which would otherwise be assessable income, may be exempt income as it relates to the current pension liabilities of the fund or PST unitholders. All of the ordinary income and statutory income of the fund or PST has been included as part of the total shown at label W. Therefore, to ensure the income derived is appropriately taxed, it is necessary to subtract the exempt amount at label Y from label W to calculate label V Total assessable income.

Do not reduce the exempt income shown at label Y by the amount of expenses incurred in deriving that exempt income. Doing so will understate the amount of exempt current pension income (ECPI) and will result in some of that income being subject to tax.

Expenses incurred in gaining or producing exempt income are not deductible. Do not show those expenses anywhere at item 11 Deductions.

For treatment of expenses incurred wholly or partly in producing assessable income, see Section C: Deductions.

Current pension liabilities are the fund's currently existing liabilities to pay retirement phase superannuation income stream benefits (superannuation income stream benefits paid from superannuation income streams that are in retirement phase).

From 1 July 2017, the exemption applies only to current pension liabilities in respect of superannuation income streams that are in retirement phase. A transition to retirement income stream (TRIS) will not be in retirement phase unless the recipient is 65 years old or older, or has notified the fund they have met a condition of release with a nil cashing restriction (retirement, terminal medical condition or permanent incapacity).

An account-based pension is not in retirement phase if that income stream is specified in a commutation authority issued by the Commissioner and the fund has not complied with the authority.

A deferred superannuation income stream is in retirement phase where the intended recipient has met a condition of release with a nil cashing restriction (retirement, terminal medical condition, permanent incapacity or 65 years old or older).

There are 2 methods by which the trustee of a fund can determine the exempt income shown at label Y. Either one method or both methods may be used depending on the circumstances. Different conditions for claiming the exemption apply, depending on the method used.

A fund is entitled to a franking credit tax offset even where the franked dividends are part of exempt current pension income.

Small superannuation funds and the exempt current pension income method

Complying funds with no more than 6 members (a small superannuation fund), should refer to exempt current pension income (ECPI) for small superannuation funds to confirm which ECPI method the fund is eligible to use and their actuarial certificate requirements.

First method: Income from segregated assets used to meet current pension liabilities

The following content does not apply to small superannuation funds. See ECPI for small superannuation funds.

If a complying fund segregates certain assets to provide for current pension liabilities in respect of retirement phase superannuation income stream benefits, the income from those assets is exempt from income tax (section 295-385 of the ITAA 1997).

Non-arm’s length income and assessable contributions cannot be exempt from income tax under the exempt current pension income rules.

The market value of the assets that the fund has segregated to provide for current pension liabilities in respect of retirement phase superannuation income stream benefits cannot exceed the balance of the accounts that pay the income streams.

Fund in full retirement phase for entire income year or part of the income year

When a fund has been in full retirement phase for the entire income year, and the market value of the assets of the fund does not exceed the account balance supporting the benefits, the fund is required to use the segregated method to calculate ECPI.

When a fund has been in full retirement phase for part but not all of the income year, the fund may choose to treat all of the fund's assets as not being segregated current pension assets and use only the proportionate method to calculate ECPI for the entire income year.

If the fund does not make a choice, they must use the segregated method to calculate ECPI for the period they are in full retirement phase.

Note: This choice is not a formal election and does not have to be submitted to the ATO. However, it is expected that trustees will keep a record of any choice they make and the details of the calculation they use.

Is an actuarial certificate required?

An actuarial certificate is not required if:

• assets that provide for current pension liabilities in respect of retirement phase superannuation income stream benefits are segregated at all times during the income year, and
• the only retirement phase superannuation income stream benefits being paid from the segregated assets are from allocated pensions, market linked pensions and account-based pension types (Section 295-385.01 of the Income Tax Assessment (1997 Act) Regulations 2021).

An actuarial certificate is required if the fund paid any other type of superannuation income stream. If an actuarial certificate is required, it must be for all the retirement phase superannuation income stream benefits that the fund paid (even if some of the income streams are allocated pensions, market linked pensions or account-based pensions).

If the trustee requires an actuarial certificate, this must be obtained before the date for lodgment of the fund’s tax return.

Second method: Income from unsegregated assets used to meet current pension liabilities

The following content does not apply to small superannuation funds. See ECPI for small superannuation funds.

If a complying fund's income is derived from assets that are not segregated, the fund must get an actuarial certificate for each year they claim exempt current pension income, regardless of the types of retirement phase superannuation income stream benefits being paid. The actuarial certificate will show the proportion that the fund will apply to its income (other than excluded income) to determine its exempt income. For the purpose of calculating exempt income using this method, non-arm's length income, assessable contributions, income derived from segregated non-current assets and income exempted under the first method are excluded from the fund's income (subsection 295-390(2) of the ITAA 1997).

An actuarial certificate is required under subsection 295-390(4) of the ITAA 1997. It must be obtained before the date for lodgment of the fund’s tax return.

An actuarial certificate is also required if the fund has segregated non-current assets (subsection 295-395(1) of the ITAA 1997). It must be obtained before the date for lodgment of the fund’s tax return.

Pooled superannuation trusts

There are 2 alternative methods by which the trustee of a PST determines the exempt income at label Y.

The first method is set out in subsection 295-400(1) of the ITAA 1997. That subsection sets out a formula for calculating the proportion of ordinary income and statutory income, that would otherwise be assessable income, that is, exempt income. The exempt proportion is represented by the average number of units in the PST during the income year that are segregated current pension assets of unitholders that are complying funds divided by the average number of units in the PST during the income year.

Non-arm's length income, and assessable income transferred by a fund to the PST under section 295-260 of the ITAA 1997, is excluded from the exemption.

Alternatively, the trustee of a PST can choose a different amount as exempt income of the PST by applying subsections 295-400(3) and (4) of the ITAA 1997. Under that method the proportion of income that is exempt is the percentage of assessable income of the PST that would have been exempt income under section 295-385 or 295-390 of the ITAA 1997 if it had been derived instead by the unitholders in the PST in proportion to their unit holdings in the PST.

Use Example 3 to help you calculate exempt current pension income. Example 3 is made up of 3 parts:

• Example 3a: Calculating exempt current pension income for a fund in 'full pension phase'
• Example 3b: Calculating exempt current pension income by the 'unsegregated assets' method
• Example 3c: Applying tax losses for a fund with exempt current pension income

V Total assessable income

Show at label V the total assessable income or loss by subtracting label Y Exempt Current Pension Income from label W Gross Income.

Where there is no income, print 0 (zero) at label V. If the amount shown is a loss, print L in the box at the right of the amount.

Continue to: Section C: Deductions