Does the SMSF have a tax loss from an earlier income year?
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No |
Leave M1 blank. Go to N. |
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Yes |
Read on. |
Write at M1 the tax losses from an earlier income year that the SMSF is claiming. The SMSF can claim tax losses only to the extent that its total assessable income exceeds total deductions (other than tax losses).
The trust loss legislation in Schedule 2F to the ITAA 1936 affects the deductibility of prior 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 super funds.
You may need to complete and attach a Losses schedule 2019 to the SMSF's annual return. For more information, see Losses schedule instructions 2019.
Tax losses are not the same as ‘capital losses’ which may result from a capital gains tax event. Do not include net capital losses at M1. Capital losses from prior years can be applied against the current year's capital gains at A Net capital gain in section B or carried forward to later income years. See V Net capital losses carried forward to later income years in section E.
Do include foreign tax losses from prior years at M1.
Do not include at M1 tax losses that relate to non-arm's-length income. Tax losses that relate to non-arm's-length income can only be applied against non-arm's-length income. If the SMSF has carried forward a loss from a non-arm's-length transaction in a prior year, use the loss to reduce the amount that you write at the non-arm's-length income questions (U1, U2 and U3) in section B.
Tax losses and tax exempt income
If the SMSF had Net exempt income in 2018–19, you must first deduct the SMSF’s tax losses from earlier income years from the SMSF’s net exempt income (section 36-15 of the ITAA 1997).
If tax losses from earlier years remain after the net exempt income has been reduced to zero, write the remaining tax losses at M1 to be deducted from the SMSF's assessable income (but only to the extent such losses are necessary to reduce the SMSF's taxable income to zero).
For more information, see Self-managed super funds and tax exemptions on pension assets.
Example 'SMSF with no ECPI': Tax losses deducted
SMSF M has no exempt current pension income, foreign income or non-arm's-length income.
In 2017–18, SMSF M made a tax loss of $30,000 which it reported at U Tax losses carried forward to later income years in section E of its 2017–18 annual return.
In its 2018–19 annual return, SMSF M reports $30,000 at M1 Tax losses deducted.
End of example
Example 'SMSF with ECPI': Tax losses deducted
SMSF MM pays retirement phase superannuation income stream benefits to one of its three members and some of its income is exempt from income tax under the exempt current pension income rules.
In 2017–18, SMSF MM made a tax loss of $30,000 which it reported at U Tax losses carried forward to later income years in section E of its 2017–18 annual return.
Using the rules described at How expenses are treated when a SMSF has ECPI, SMSF MM determines that for 2018–19, $20,000 of its income is exempt current pension income and $2,000 of its expenses relate to earning that exempt current pension income. Therefore, its net exempt income is $18,000 ($20,000 − $2,000).
In its 2018–19 annual return, SMSF MM writes $12,000 ($30,000 – $18,000) at M1 Tax losses deducted.
End of exampleContinue to: N, Y, O and Z Deduction and non-deductible expense totals