What to include at Section C
Section C deals with all expenses, both deductible and non-deductible. Provide details of all expenses the SMSF incurred in 2018–19 at the appropriate questions. Do not show cents for any amount you write in this section. In the column headed Deductions, at the appropriate items (A1 to M1), list all expenses and allowances for which the SMSF can claim a deduction.
In the column headed Non-deductible expenses, at the appropriate items (A2 to L2), list all other expenses. The SMSF cannot claim a deduction for these expenses. They include:
- income tax paid (include it at L2)
- most expenses incurred in earning exempt current pension income
- losses or outgoings that the SMSF incurred in deriving an amount that is excluded from assessable income because family trust distribution tax (FTDT) has been paid.
Do not include super benefits paid at any question in section C.
Generally, SMSFs that derive exempt current pension income cannot claim a deduction for expenses to the extent they are incurred in deriving that exempt income. Such expenditure must be apportioned.
However, some expenditure is deductible and does not have to be apportioned even though the SMSF has exempt current pension income.
For more information, see:
- How expenses are treated when a SMSF has ECPI
- 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.
Expenses that relate to non-arm's-length income
Expenses incurred in deriving non-arm's-length income:
- are not included anywhere in Section C; such expenses reduce the amount you write at the non-arm's length income labels U1, U2 and U3 in section B, except, that where non-arm’s length general expenses are actually incurred, they are included as a deduction at the appropriate label in Section C – Deductions and non-deductible expenses, to the extent that they are deductible.
- are included in Section C (labels A2 to L2 as appropriate) to the extent the expenses are non-deductible.
Expenses that relate to foreign income
Expenses incurred in deriving foreign income:
- are not included anywhere in section C to the extent the expenses are deductible; such expenses reduce the amount you write at D Net foreign income in section B
- are included in section C (A2 to L2 as appropriate) to the extent the expenses are non-deductible.
Taxation of financial arrangements (TOFA)
If the TOFA rules apply to the SMSF, include expenses from financial arrangements subject to the TOFA rules at the appropriate question. Complete Section I: Taxation of financial arrangements if you include an amount determined under the TOFA rules.
For more information, see Section I: Taxation of financial arrangements.
Continue to: A1 and A2 Interest expenses within Australia