T Assessable income due to changed tax status of fund

Write at T the amount that is to be included in the SMSF’s assessable income because it changed from:

• complying to non-complying at the beginning of 2020–21, or
• a foreign fund to an Australian super fund at the beginning of 2020–21.

The amount at T should not be reduced by any loss or outgoing related to the income.

You must:

• work out the amount of ordinary income and statutory income from previous years using the appropriate formula below and
• write the amount you worked out at T.

A change in the SMSF's compliance or residency status can change its tax rate (see the tax rates at T1 Tax on taxable income).

Assessable income arising from a change in the tax status of the SMSF is not exempt from income tax under the exempt current pension income rules.

The SMSF became a non-complying SMSF for 2020–21

If the SMSF was a complying SMSF at the end of 2019–20 and became a non-complying SMSF for 2020–21, include at T an amount calculated using formula A. Including this amount at T means that the SMSF loses the benefit of the tax concessions that it had when it was a complying SMSF.

Formula A

asset value − non-concessional contributions = assessable amount to be included at T

Asset value is the total market value of the SMSF’s assets at 30 June 2020 (that is, immediately before the start of the income year in which the SMSF became non-complying).

Non-concessional contributions are the total of:

• the part of the crystallised undeducted contributions that relate to the period after 30 June 1983, and
• the contributions segment for current members at the time that have not been, and cannot be, deducted.

Write at T the amount you calculated using formula A.

When you work out T1 Tax on taxable income in section D, the amount you worked out using formula A is taxed at 45%.

Legislation

Sections 295-320 and 295-325 of the Income Tax Assessment Act 1997

The SMSF changed from a foreign fund to an Australian super fund for 2020–21

If the SMSF was a foreign super fund for 2019–20 and became an Australian super fund for 2020–21, include at T an amount calculated using formula B.

Formula B

asset value − member contributions = assessable amount to be included at T

Asset value is the total market value of the SMSF’s assets at 30 June 2020 (that is, immediately before the start of the income year in which the SMSF became an Australian super fund).

Member contributions is the amount in the SMSF at that time representing contributions made by current members.

Write at T the amount you worked out using formula B.

When you calculate T1 Tax on taxable income in section D the amount you worked out using formula B is taxed at:

• 15% if the fund changed from a foreign fund to a complying Australian super fund
• 45% if the fund changed from a foreign fund to a non-complying Australian super fund.

Note that the SMSF is not entitled to a tax offset (at C1 Foreign income tax offset in section D) for foreign income tax paid before the start of the income year on income reported at T as a result of the change in the tax status of the SMSF.

Legislation

Sections 295-320 and 295-330 of the Income Tax Assessment Act 1997

Continue to: U1, U2, U3 and U Non-arm's length income