B1 and B2 Interest expenses overseas

Did the SMSF incur interest expenses on money borrowed from an overseas source?

Write at B1 and B2, as required, the amount of interest that the SMSF incurred in 2020–21 on money borrowed from an overseas source.

B1 Deductible interest expenses overseas

Write at B1 the amount of deductible interest expenses incurred on borrowings from overseas sources.

For example, interest expenses incurred on borrowings from overseas sources are deductible to the extent the borrowed money is used to:

• acquire assets for the purpose of earning assessable income
• finance operations for the purposes of earning assessable income, or
• meet current expenses incurred for the purposes of earning assessable income.

Do not include at B1 interest expenses (or any part of such expenses) that relate to earning:

• foreign income (see Expenses that relate to foreign income)
• non-arm's length income (see Expenses that relate to non-arm's length income)

If the SMSF paid retirement phase income stream benefits to a member, refer to How expenses are treated when an SMSF has ECPI before you claim a deduction for the SMSF's interest expenses overseas.

B2 Non-deductible interest expenses overseas

Write at B2 the amount of interest expenses that the SMSF incurred on borrowings from overseas sources that is not deductible. This includes an amount of interest expense to the extent the expense is incurred for the purposes of earning exempt income.

PAYG withholding

SMSFs must remit to us the amount of tax (withholding tax) they have withheld, or should have withheld, from interest paid or payable to:

• non-residents, or
• residents, where the resident's interest is derived through an overseas branch.

If the SMSF is required to have withheld an amount from interest paid, or is required to withhold from interest payable, the SMSF must register for PAYG withholding and lodge a PAYG withholding from interest, dividend and royalty payments paid to non-residents – annual report.

If the SMSF paid interest to non-residents, keep a record of the following:

• name and address of recipients
• amount of interest paid or credited
• amount of tax withheld
• the date that the tax withheld was remitted to us.

For more information, see Record-keeping requirements.

Continue to: D1 and D2 Capital works expenditure