Did the SMSF receive non-arm's-length income?
No |
Leave U1, U2, U3 and U blank. Go to W. |
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Yes |
Read on. |
Was the SMSF a complying SMSF for 2015–16?
No |
Leave U1, U2, U3 and U blank. Write the non-complying SMSF's non-arm's-length income where appropriate at A to T above. Then go to W. |
|---|---|
Yes |
Read on. |
Write the SMSF's non-arm's-length income at:
- U1 Net non-arm's-length private company dividends
- U2 Net non-arm's-length trust distributions
- U3 Net other non-arm's-length income.
- Consider whether any income that the SMSF earned in 2015–16 was earned through a transaction that was not at arm's length.
For more information about identifying the SMSF's non-arm's-length income, see Non-arm's-length income.
Non-arm's-length income is not exempt from income tax under the exempt current pension income rules.
Net non-arm's-length income
Each amount of non-arm’s-length income is reduced by any deductions attributable, either in whole or in part, to that income. Deductions against that income are those that relate exclusively to the non-arm's-length income and as much of other deductions that appropriately relate to that income. Use these deductions to reduce the amount that you write at U1, U2 or U3. The amounts deducted against the SMSF's non-arm's-length income should not be included in Section C.
Non-arm's-length losses
If the net amount of non-arm's-length income is a loss, do not show the loss at U. The loss may be offset against future non-arm's-length income. Keep a record of the loss amount with the SMSF's tax records.
U1 Net non-arm’s-length private company dividends
Was the SMSF paid non-arm’s-length private company dividends?
No |
Leave U1 blank. Go to U2. |
|---|---|
Yes |
Read on. |
Write at U1 the total of:
- non-arm’s-length private company dividends which were paid to the complying SMSF in 2015–16, and
- franking credits attached to the non-arm's-length private company dividends if the SMSF is entitled to a corresponding franking credits tax offset (see Entitlement to a franking credits tax offset)
less
- deductible expenses related to earning the non-arm's-length private company dividends.
If you are unsure whether some or all of the SMSF's income is non-arm's-length, see Non-arm's-length income.
Include non-share dividends that are non-arm's-length income at U1.
Do not include private company dividends that are arm's length income (include these at A to T as appropriate). In addition to including a franking credit at U1, you must also include it at either:
- E1 Complying fund’s franking credits tax offset in Section D if the SMSF is a complying fund
- C2 Rebates and tax offsets in Section D if the SMSF is a non-complying fund.
Non-arm's-length private company dividends are not exempt from income tax under the exempt current pension income rules.
U2 Net non-arm's-length trust distributions
Did the SMSF receive a share of net income from a trust that is non-arm's-length?
No |
Leave U2 blank. Go to U3. |
|---|---|
Yes |
Read on. |
Write at U2 the total of:
- any non-arm's-length income which the complying SMSF received in 2015–16 as a share of net income from a trust
less
- deductible expenses related to earning the amount at U2.
If you are unsure whether a share of net income from a trust is non-arm's-length, see Non-arm's-length income.
Include the following types of income at U2 if the income is non-arm's-length income and received as a share of net income from a trust:
- net capital gains
- dividends (or non-share dividends), along with any attached franking credits if the SMSF is entitled to a corresponding tax offset (see Entitlement to a franking credits tax offset).
In addition to including a franking credit at U2, you must also include it at either:
- E1 Complying fund’s franking credits tax offset in Section D if the SMSF is a complying fund
- C2 Rebates and tax offsets in Section D if the SMSF is a non-complying fund.
Do not include a share of net income from a trust that is arm's-length income (include this at M Gross trust distributions).
A share of net income from a trust that is non-arm's-length is not exempt from income tax under the exempt current pension income rules.
U3 Net other non-arm's-length income
Does the SMSF have any other non-arm’s-length income?
No |
Leave U3 blank. Go to U. |
|---|---|
Yes |
Read on. |
Write at U3 any non-arm's-length income which the complying SMSF has for 2015–16 and that was not included at U1 or U2. If you are unsure whether the income is non-arm's-length, see Non-arm's-length income.
Do not include:
- non-arm's-length income that is more appropriately included at U1 Net non-arm's-length private company dividends or U2 Net non-arm's-length trust distributions
- income that is arm's-length income (write it at A to T as appropriate).
Non-arm's-length income is not exempt from income tax under the exempt current pension income rules.
U Net non-arm's-length income
Add the amounts you wrote at U1, U2 and U3.
When you work out T1 Tax on taxable income in Section D, a tax rate of 47% is applied to the income you write at U.
Non-arm's-length income is not exempt from income tax under the exempt current pension income rules.