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Section B: Income (item 11)

Instructions for completing Section B of the SMSF annual return.

Last updated 5 August 2024

Do you need to complete section B?

Most SMSFs need to complete section B. However, you do not complete section B if all the SMSF's income in 2020–21 is exempt from income tax under the exempt current pension income rules.

Do not assume that the SMSF has no assessable income (and that you do not need to complete section B) just because all its members received retirement phase superannuation income stream benefits in 2020–21. Situations where an SMSF has assessable income even though it pays retirement phase superannuation income stream benefits to all its members include:

  • the SMSF is non-complying
  • the SMSF has non-arm's length income
  • the SMSF received assessable contributions
  • the SMSF paid less than the minimum annual pension payment amount to one or more members receiving retirement phase superannuation income stream benefits (see Income stream (pension))
  • the SMSF is not paying retirement phase superannuation income stream benefits to all members for the entire income year
  • the SMSF is paying superannuation income stream benefits from an income stream that is not in retirement phase, for example, a transition to retirement income stream paid to a member who is under 65 and has not notified the SMSF they have met a condition of release with a nil cashing restriction
  • the value of the SMSF's assets exceeds the total of the account balances supporting the income streams (for example, an SMSF may keep assets in a reserve account, separate from the members’ accounts, to be prepared for certain contingencies).

Whether or not you need to complete section B, remember to complete Section C: Deductions and non-deductible expenses where you include expenses that relate to the SMSF's tax-exempt income. Expenses, that are normally deductible, are generally non-deductible when they relate to tax-exempt income.

Answering questions in section B

Complete section B for all assessable income the SMSF earned during 2020–21, whether the SMSF received it or not.

Work through each question in this section and:

  • write the relevant amount if the question applies to your SMSF
  • write 0 (zero) at the mandatory question R3 No-TFN-quoted contributions if it does not apply to your SMSF
  • leave the answer box blank for other questions that do not apply to your SMSF.

Answer the questions in their sequence.

  • Some questions rely on information you have already entered in previous questions.
  • You will need to go through the questions in the left-hand column (D1, R1 to R6, U1 to U3) before you can complete three questions in the right-hand column (D, R, U).

Do not show cents for any amount you write in this section.

Goods and services tax (GST)

If the SMSF is registered, or required to be registered, for GST purposes, do not include GST amounts in the assessable income you show on the annual return. In the deductions you show, do not include any amount that relates to input tax credit entitlements.

If the SMSF 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 you show are the GST-inclusive amounts that the SMSF incurred. Special rules apply to GST adjustments. To register for GST, apply at the Australian Business RegisterExternal Link.

Foreign currency translation rules

If the SMSF has entered into transactions in a foreign currency or derived income in a foreign currency, you need to translate those amounts to Australian currency to calculate the assessable or deductible amount.

For more information, see:

Taxation of financial arrangements (TOFA)

If the TOFA rules apply to the SMSF, include assessable income 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.

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

Do not include at any question in section B any part of a distribution:

  • received from a trust or partnership on which family trust distribution tax (FTDT) has been paid (do not show this anywhere in the annual return), or
  • received (directly or indirectly) from a closely held trust on which trustee beneficiary non-disclosure tax (TBNT) has been paid (do not show this anywhere in the annual return).

Losses and outgoings that the SMSF incurred in deriving an amount that is excluded from assessable income because FTDT or TBNT has been paid are not deductible (report them as non-deductible expenses).

The SMSF cannot claim a franking credits 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.

Factors you need to consider when deciding whether a transaction is at arm's length.

Complete this section if the SMSF has assessable income earned during the 2020-21 income year.

Did the SMSF earn income from renting, leasing or hiring of land, buildings or other assets.

Did the SMSF earn interest income from and Australian source?

Did the SMSF earn income from a forestry managed investment scheme?

Did the SMSF have foreign income of losses in 2020-21?

Did the SMSF receive Australian franking credits attached to a distribution from a New Zealand company?

Did the SMSF receive amounts transferred from foreign super funds?

Did the SMSF receive payments from which the payer had withheld an amount because the SMSF had not provided its ABN?

Did the SMSF receive any gross distribution from partnerships?

Did the SMSF receive, or was the SMSF entitled to receive, a share of net income from other trusts?

Did the SMSF receive any income not included at another question in Section B?

Did the SMSF change from a complying to non-complying fund, or from a foreign fund to an Australian super fund?

Instructions on calculating gross income.

QC64911