Expenses not to show
Do not show anywhere in the tax return any expenses that the fund incurred in deriving exempt current pension income (ECPI). This means that those expenses cannot be included as part of any other deductions claimed at labels A to L.
Do not show anywhere in this section any expenses that the fund incurred in deriving non-arm’s length income and used to calculate the amount at item 10 Income – label U Net non-arm’s length income. This means that those expenses cannot be included as part of any other deductions claimed at labels A to L. Each amount of non-arm’s length income is reduced by any deductions attributable, either in whole or in part, to that income and is used to calculate the net amount at item 10 Income – label U Net non-arm’s length income.
However, for small APRA regulated funds, where the 'Twice the difference approach' applies as a result of a non-arm’s length general expense incurred, the actual amount of 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.
A Interest expenses within Australia
Show at label A the deductible interest incurred on money borrowed from Australian sources for the purpose of earning assessable income to:
- acquire income-producing assets
- finance operations
- meet current expenses.
If the TOFA rules apply to the fund, include interest expenses within Australia from financial arrangements subject to the TOFA rules at label A.
B Interest expenses overseas
Show at label B the deductible interest incurred on money borrowed from overseas sources to:
- acquire income-producing assets
- finance operations
- meet current expenses.
If the TOFA rules apply to the fund, include interest expenses from overseas from financial arrangements subject to the TOFA rules at label B.
The fund should generally withhold an amount of tax (withholding tax) from interest paid or payable to non-residents, and from interest paid to a resident which was derived by the resident through an overseas branch. The fund must remit these amounts to us.
Record keeping
If the fund paid interest to non-residents, it must keep a record of the following:
- name and address of recipients
- amount of interest paid or credited
- amount of tax withheld and the date it was remitted to us.
If the fund has withheld amounts from payments to non-residents the fund may need to lodge by 31 October 2023 PAYG withholding from interest, dividend and royalty payments paid to non-residents – annual report.
C Salary and wages
Show at label C the total deductible salary, wage and other labour costs incurred in respect of employees employed by the trustee of the fund.
These expenses include any salary and wages, superannuation contributions, allowances, bonuses, payments for casual labour, retainers and commissions paid to people who receive a retainer, and workers compensation paid through the payroll, where any of these payments are applicable to the fund.
Also included are direct and indirect labour, holiday pay, long service leave, lump sum payments, other employee benefits, overtime, payments under an incentive or profit sharing scheme, retiring allowances and sick pay, where any of these payments are applicable to the fund. Include any salary and wages paid to an associated person of the fund.
However, these expenses exclude pension payments, agency fees, contract payments, sub-contract payments, service fees, superannuation benefits, reimbursements or allowances for travel, wages or salaries reimbursed under a government program, management fees and consultant fees.
The fund cannot deduct salary and wage expenses where the fund has not complied with the pay as you go withholding obligations. See Removing tax deductibility of non-compliant payments.
D Capital works deductions
Show at label D the deduction claimed for capital expenditure on buildings and structural improvements used to produce assessable income (such as bridges, pipelines, retaining walls and sealed roads), which includes eligible capital expenditure on extensions, alterations or improvements, and shop fitouts.
Do not include capital expenditure on property for which a deduction is allowable, or would be allowable if the property were to be used for the purpose of producing assessable income, under another specified provision of the ITAA 1936 or the ITAA 1997 (for example, do not include capital expenditure on mining infrastructure buildings and timber milling buildings).
For more information, see Appendix 1: Capital works deductions.
E Deduction for decline in value of depreciating assets
Show at label E the deduction for decline in value of depreciating assets for tax purposes.
The decline in value of a depreciating asset is generally worked out using either the prime cost or diminishing value method. Both methods are based on the effective life of an asset. For most depreciating assets, the fund can choose whether to self-assess the effective life or to adopt the Commissioner’s determination which can be found in TR 2022/1 Income tax: effective life of depreciating assets (applicable from 1 July 2022).
The fund can deduct an amount equal to the decline in value for an income year of a depreciating asset that it held for any time during that income year. However, the deduction is reduced to the extent that the fund uses it or has it installed ready for use for other than a taxable purpose.
The decline in value of a depreciating asset costing $300 or less is its cost (but only to the extent the asset is used for a taxable purpose) if the asset satisfies all of the following requirements:
- it is used predominantly for the purpose of producing assessable income that is not income from carrying on a business
- it is not part of a set of assets acquired in the same income year that together cost more than $300, and
- it is not one of any number of substantially identical items acquired in the same income year that together cost more than $300.
The decline in value of certain assets with a cost or opening adjustable value of less than $1,000 can be calculated through a low-value pool. Assets eligible for an immediate deduction cannot be allocated to a low-value pool.
Deductible balancing adjustment amounts are included at label L Other deductions.
You must comply with the record-keeping requirements that apply to all depreciating assets. See Record keeping for capital expenses.
For an explanation of the concepts and terms mentioned above, and for more information on deductions for decline in value, see the Guide to depreciating assets 2023.
You can work out your capital allowance deductions by using the Depreciation and capital allowances tool.
F Death or disability premiums
Show at label F deductions for insurance premiums paid by a complying superannuation fund to provide benefits upon the death, existence of a terminal medical condition or temporary or permanent disability of the member (as described in section 295-460 of the ITAA 1997).
A fund may use a variety of life insurance policies to provide these benefits.
Calculating the deduction
The fund can deduct the following:
- 30% of the premium for a whole-of-life policy if all the individuals whose lives are insured are members of the fund; for more information on what a 'whole-of-life policy' is for these purposes see section 295-480 of the ITAA 1997 and ATO ID 2009/100 Complying superannuation fund: deductibility of premiums on 'whole-of-life policy' – subsection 295-465(1) of the ITAA 1997
- 10% of the premium for an endowment policy if all the individuals whose lives are insured are members of the fund; for more information on what an ‘endowment policy’ is for these purposes, see section 295-480 of the ITAA 1997
- for a policy that is not a whole-of-life or endowment policy
- 30% of the part of an insurance policy premium that is specified in the policy as being for a distinct part of the policy that would have been a whole-of-life policy if it had been a separate policy, where all the individuals whose lives are insured are members of the fund
- 10% of the part of an insurance policy premium that is specified in the policy as being for a distinct part of the policy that would have been an endowment policy if it had been a separate policy, where all the individuals whose lives are insured are members of the fund
- the part of a premium that is specified in an insurance policy as being wholly for the liability to provide certain death, terminal medical condition or disability benefits for fund members
- the proportion of the premium that is specified in Table 4 as being attributable to the liability to provide death or disability benefits for fund members.
TPD any occupation means insurance against the member suffering an illness or injury that is likely to result in the member’s permanent inability to work in any job for which the member is reasonably qualified by education, training or experience.
TPD own occupation means insurance against the member suffering an illness or injury that is likely to result in the member’s permanent inability to work in the member’s own occupation (other than in a substantially reduced capacity).
An actuarial certificate is not required to be obtained in order to deduct the premium, or a proportion of the premium, as specified in Table 4.
The fund may deduct a proportion other than that specified in the Income Tax Assessment (1997 Act) Regulations 2021, as contained in Table 4 for the premium, but to do so must obtain an actuary’s certificate before the date for lodgment of the fund’s tax return.
For any other insurance policy premium that is not deductible in accordance with the above circumstances, an actuarial certificate is also required to deduct all or a proportion of the premium for a policy that is to provide benefits upon the death, existence of a terminal medical condition or disability of the member.
For more information, see TR 2012/6 Income tax: deductibility under subsection 295-465(1) of the Income Tax Assessment Act 1997 of premiums paid by a complying superannuation fund for an insurance policy providing Total and Permanent Disability cover in respect of its members.
A complying superannuation fund may also deduct premiums on insurance policies to replace income during periods of temporary disability.
If a fund has current or contingent liabilities to provide superannuation benefits upon the death, existence of a terminal medical condition or temporary or permanent disability of a member but does not have insurance coverage (that is, it self-insures), then a deduction is allowable. The deduction is allowable for an amount equal to what the fund could reasonably expect to pay in an arm’s length transaction to obtain an insurance policy to cover these liabilities. An actuarial certificate must be obtained before the date for lodgment of the fund’s tax return for the amount to be deductible. However, there are regulatory changes to self-insurance for regulated superannuation funds that only allow self-insurance in limited circumstances.
If an actuary certifies the amount a fund could reasonably expect to pay in an arm’s length transaction to obtain an insurance policy, and
- that policy covers liabilities of the fund that are broader than those covered in section 295-460 of the ITAA 1997, and
- the insurance policy is specified in the regulations
then the fund may deduct so much of that certified amount as specified in Table 4.
Rather than claiming a deduction for insurance premiums paid or an amount under the self-insurance provisions, a complying superannuation fund may choose to deduct (under section 295-470 of the ITAA 1997) an amount based on a formula for payments for the income year for death, terminal medical condition or disability benefits. Deductions for this amount should be included at label F.
I Investment expenses
Show at label I the amount of deductible expenses of a revenue nature incurred in deriving investment income, unless the deduction is more appropriately shown at another label. Do not include any amount that you show at labels J Management expenses or Q Administration expenses.
Complying superannuation funds and complying ADFs may claim deductions for expenses incurred in relation to acquiring, holding or disposing of:
- units in a PST
- life insurance policies issued by life insurance companies
- interests in trusts whose assets consist wholly of such life insurance policies.
The fund can claim the expenditure as a deduction if the expenditure would qualify for deduction under the provisions of the ITAA 1936 or the ITAA 1997 if any profits, gains or bonuses received from the investments listed above that are not assessable income were instead included in assessable income.
The fund cannot deduct amounts for investment charges that the PST or life insurance company deducts from gross contributions transferred to it from the fund. In this case, the charges are of a capital nature as they reduce the amount of the investment, and are therefore not deductible.
Complying superannuation funds cannot deduct amounts for fees or charges incurred for ‘complying superannuation life insurance policies’, exempt life insurance policies, or units in a PST that are segregated current pension assets of the fund, other than amounts claimed at label F Death or disability premiums.
For information on general principles governing the tax deductibility of expenditure incurred by superannuation funds, see TR 93/17 Income tax: income tax deductions available to superannuation funds.
J Management expenses
Show at label J the amount of deductible expenses of a revenue nature incurred in the management of the fund, unless the deduction is more appropriately shown at another label. Do not include investment management expenses. These expenses should be shown at label I Investment expenses.
Management expenses are fees incurred by the superannuation entity for management services provided by a third party to the superannuation entity. Such expenses may be met by the fund through management fees deducted from member accounts that are based on a percentage of the funds under management.
Management expenses also include consulting fees.
Q Administration expenses
Show at label Q the amount of deductible expenses of a revenue nature incurred in the administration of the fund, unless the deduction is more appropriately shown at another label.
Administration expenses are fees incurred in the administration of the superannuation entity. These fees include both internal and outsourced administration costs, unless these are incurred directly by the employer sponsor.
They include administration fees charged by, or paid to, the employer sponsor for services rendered to the superannuation entity, and expenses incurred to administer switches of members’ investment choices. They do not include investment manager fees or other investment expenses that should be shown at label I Investment expenses.
U Forestry managed investment scheme deduction
Show at label U the total amount of deductible payments made under an FMIS.
The fund may be entitled to claim a deduction at label U for payments made under an FMIS if:
- the fund currently holds a forestry interest in an FMIS, or held a forestry interest in an FMIS during 2022–23
- the fund paid an amount to a forestry manager of an FMIS under a formal agreement
- the forestry manager has advised the fund that the FMIS satisfies the 70% direct forestry expenditure rule in Division 394 of the ITAA 1997
- the fund did not have day to day control over the operation of the scheme
- there was more than one participant in the scheme or, the forestry manager or an associate of the forestry manager manages, arranges or promotes similar schemes, and
- all the trees were established within 18 months of the end of the income year in which an amount is first paid under the FMIS by a participant in the scheme.
If the fund is an initial participant in an FMIS it can claim a deduction for initial and ongoing payments at this item. The fund cannot claim a deduction if a CGT event happens in relation to its forestry interest in an FMIS within 4 years after the end of the income year in which it first made a payment under the FMIS. However, the deduction will not be denied for that reason if the CGT event happens because of circumstances outside of the fund's control, provided the fund could not have reasonably foreseen the CGT event happening when it acquired the interest. CGT events happening that would generally be outside the fund's control may include compulsory acquisition, insolvency of the fund or the scheme manager, or cancellation of the interest due to fire, flood or drought.
If the fund is a subsequent participant, it cannot claim a deduction for the amount paid to acquire the interest. The fund can only claim a deduction for ongoing payments.
The deduction is claimed in the income year in which the payment is made.
Relevant terms are explained at item 10 – label X Forestry managed investment scheme income.
Excluded payments
The fund cannot claim a deduction at label U for any of the following:
- payments for borrowing money
- payments of interest and payments in the nature of interest (such as a premium on repayment or redemption of a security, or a discount of a bill or bond)
- payments of stamp duty
- payments of GST
- payments that relate to the transportation and handling of felled trees after the earliest of the following
- sale of the trees
- arrival of the trees at the mill door
- arrival of the trees at the port
- arrival of the trees at the place of processing (other than where processing happens in-field)
- payments that relate to processing
- payments that relate to stockpiling (other than in-field stockpiling)
- payments that relate to marketing and sale of forestry produce.
While the payments are not deductible under Division 394 of the ITAA 1997, the payments may be deductible under other provisions of the ITAA 1997 or ITAA 1936 and claimable at other labels.
R Foreign exchange losses
Show at label R deductible foreign exchange losses (from both foreign and domestic sources) made by the fund, see Foreign exchange (forex) gains and losses.
If the TOFA rules apply to the fund, include all deductible foreign exchange losses from financial arrangements subject to the TOFA rules at label R.
L Other deductions
Write at label L the total amount of all other deductions that don't fall into any of the other categories shown in Section C: Deductions. For small APRA funds, this may include the actual amount of general expense incurred which gave rise to the 'Twice the difference approach' where it does not appropriately fall within any other label in Section C – Deductions, to the extent that it is deductible.
Deductions that are specifically allowable for superannuation activities include amounts in the following 9 categories:
- Exclusion of personal contributions
- Taxation of financial arrangements
- Contribution that is a fringe benefit
- Return of contributions by non-complying funds
- Deductible balancing adjustment amounts
- Environmental protection activities (EPA) expenditure
- Deduction relating to listed investment company (LIC) capital gain amount
- Deduction relating to foreign non-assessable non-exempt income
- Superannuation (Financial Assistance Funding) Levy Act 1993
Exclusion of personal contributions
A complying superannuation fund (including a successor fund) can deduct an amount for personal contributions of a member to the extent the personal contributions have been included in the fund’s assessable income in an earlier income year and the member has reduced the amount the member deducted by a notice (the variation notice) under section 290-180 of the ITAA 1997 if:
- that variation notice was received by the fund after it had lodged its income tax return for the income year that included the contribution as assessable income, and
- the fund has not exercised its option (under subsection 295-195(3) or 295-197(4) of the ITAA 1997) to amend the return for the income year that included the contribution as assessable income.
If the notice was received after the fund had lodged its tax return for the income year in which the contributions were made, the fund may choose to amend the assessment of the earlier income year in which the contribution was made to exclude the amount from its assessable income. This choice may be made if it would result in a reduction in the fund’s tax liability for the earlier income year that is greater than the reduction that would occur in the fund’s tax liability for the income year (subsections 295-195(2) and (3) and 295-490(1) Item 2 of the ITAA 1997).
A successor fund is also entitled to a deduction to the extent the contributor’s personal contributions have been reduced by a notice given to the successor fund under section 290-180 of the ITAA 1997 and the original fund has included the contribution amount in its assessable income (subsections 295-197(3) and (4) and 295-490(1) Item 2A of the ITAA 1997).
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 L any deductible losses 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:
- Section C: Deductions – label A Interest expenses within Australia
- Section C: Deductions – label B Interest expenses overseas
- Section C: Deductions – label R Foreign exchange losses
- Section B: Income – label D Net foreign income.
If what you show at label L or elsewhere in Section C: Deductions includes an amount brought to account under the TOFA rules, also complete item 16 Taxation of financial arrangements (TOFA).
For more information, see the Guide to the taxation of financial arrangements (TOFA).
Contribution that is a fringe benefit
A superannuation entity can claim a deduction for an amount included in its assessable income as an assessable contribution that is a fringe benefit because it will be taxed as a fringe benefit in the hands of the contributor. The amount can be deducted in the income year in which the contribution is included in assessable income.
A contribution made for an employee to a complying superannuation fund is not a fringe benefit.
Return of contributions by non-complying funds
A superannuation fund that has been non-complying since 1 July 1988, or since it was established if this is later, can deduct an amount which it pays to an entity (the receiving entity), so far as the amount reasonably represents the direct or indirect return of:
- a contribution for which the receiving entity or another entity has deducted or can deduct an amount, or
- earnings on such a contribution
and the receiving entity includes the amount in its assessable income under section 290-100 of the ITAA 1997.
The amount can be deducted by the superannuation fund in the income year in which it is included in the receiving entity's assessable income.
Deductible balancing adjustment amounts
If the fund ceases to hold or to use a depreciating asset, it will need to calculate a balancing adjustment amount to include in its assessable income or to claim as a deduction.
For more information, see the Guide to depreciating assets 2023.
Environmental protection activities (EPA) expenditure
A deduction is allowed (under section 40-755 of the ITAA 1997) for certain capital expenditure incurred for the sole or dominant purpose of:
- preventing, fighting or remedying pollution of the environment resulting from an earning activity, or the site of an earning activity, or
- treating, cleaning up, removing or storing waste resulting from an earning activity, or the site of an earning activity.
Expenditure that forms part of the cost of a depreciating asset is not deductible as expenditure on EPA if a deduction is available for the decline in value of the asset.
For more information, see the Guide to depreciating assets 2023.
Deduction relating to listed investment company (LIC) capital gain amount
A LIC can pay a dividend to a superannuation entity that includes a LIC capital gain amount which is shown in the LIC’s dividend statement.
The complying superannuation entity can claim a deduction of one-third of that LIC capital gain amount.
An Australian resident non-complying superannuation fund that is a trust can claim a deduction of one-half of that LIC capital gain amount.
Deduction relating to foreign non-assessable non-exempt income
Certain expenses relating to foreign non-assessable non-exempt income are allowable deductions against the fund’s assessable income if the expenses incurred are a cost in relation to certain debt interests (see section 25-90 of the ITAA 1997, or subsection 230-15(3) of the ITAA 1997 for a debt interest that is a financial arrangement covered by the TOFA rules). For superannuation funds, the relevant non-assessable, non-exempt income is foreign source income that is covered by section 23AI or 23AK of the ITAA 1936.
These deductions should not be applied against item 10 Income – label D1 Gross foreign income for the purpose of calculating label D Net foreign income or a foreign loss.
Superannuation (Financial Assistance Funding) Levy Act 1993
Levies imposed by regulations under section 6 of the Superannuation (Financial Assistance Funding) Levy Act 1993 can be deducted by regulated superannuation funds and ADFs in the income year in which the levy is incurred.
Print in the Code box the code from Table 5 that best describes the largest amount included at label L Other deductions.
You cannot claim a deduction against the assessable income of the fund for superannuation benefits paid.
There is no provision for funds to transfer or pass on deductions to other entities (for example, life insurance companies or PSTs).
M Tax losses deducted
Show at label M the tax losses (from an earlier income year) that the fund is claiming. The fund can claim tax losses only to the extent that its total assessable income exceeds total deductions (other than tax losses).
The fund’s tax losses brought forward must first be deducted from the amount of the fund’s net exempt income (section 36-15 of the ITAA 1997). The fund’s net exempt income for an Australian resident is the fund’s gross exempt income less the expenses (other than capital expenses) incurred in deriving that income and any taxes payable outside Australia on that exempt income. Example 4c shows the effect of exempt current pension income on tax losses.
Tax losses are not the same as ‘capital losses’ which may result from a capital gains tax event. Do not show net capital losses at label M. See, item 13 – label V Net capital losses carried forward to later income years.
The trust loss legislation in Schedule 2F to the ITAA 1936 affects the deductibility of prior income year losses by all trusts that are not excepted trusts (as defined in section 272-100 of Schedule 2F to the ITAA 1936), such as non-complying superannuation funds.
The fund may need to complete and attach a Losses schedule 2023 to its tax return; see:
N Total deductions
Show at label N the total of all deductions from labels A to M (which includes labels Q, U and R). This amount takes into account concessions and adjustments allowable for income tax purposes.
O Taxable income or loss
Show at label O the taxable income or loss by subtracting item 10 Income – label N Total deductions from V Total assessable income. If the amount calculated is an overall loss for the income year, print L in the Loss box at the right of the amount. This label is mandatory. You must include an amount at this label even if it is zero (if zero, write 0).
Continue to: Section D: Income tax calculation statement