H1, H2, H3, H5, H6, H8 and H Eligible credit questions

If the SMSF is entitled to any credits for tax or TFN amounts withheld or for interest, the total eligible credits are available as a credit amount in the overall calculation. If the amount of eligible credits exceeds the tax payable and the levy amount then the SMSF may be entitled to a refund of the excess.

H1 Credit for interest on early payments – amount of interest

Is the SMSF entitled to interest on early payments made to the ATO?

Write at H1 the calculated interest amount of 50 cents or more for early payments.

Do not write the amount of the early payment at H1.

We may pay interest where the SMSF paid certain amounts more than 14 days before the due date of payment. Amounts that may attract early payment interest include payments of:

• income tax
• shortfall interest charge
• interest payable under section 102AAM of the ITAA 1936.

Amounts that you do not pay directly to us, but which are reduced by the crediting or applying of an amount, do not attract early payment interest. These amounts include:

• credit for instalments payable under the PAYG instalment regime
• credit for amounts withheld from withholding payments under the PAYG withholding regime
• an overpayment of other income tax liabilities
• a running balance account (RBA) surplus, and
• any other credit entitlement arising under a tax law.

Early payment interest is also not payable on any part of the payment that exceeds the amount due or attracts interest on overpayment.

Early payment interest is calculated from the date the early payment is made to the date the amount becomes due and payable. However, if you pay an amount early on account of a tax liability, and we refund it before the due date of the liability, interest will not accrue for the period after the date on which we refund the amount.

Date of payment is either:

• the date shown on the receipt
• the date the payment is mailed to us plus three business days, or
• the date shown on the SMSF’s bank statement if payment is made through direct debit, that is, electronic funds transfer (EFT).

Table 8: Interest on early payments

If the early payment extends over two or more quarters, calculate the interest for the number of days in each quarter.

For 2020–21 interest is calculated as follows:

Interest = (number of days ÷ 365) × amount of payment for that quarter × interest rate (for that quarter)

You cannot claim a credit for interest of less than 50 cents on early payments.

Keep a record of the amount of the early payment interest payable. This interest is assessable income in the income year in which it is paid to the SMSF or credited against another SMSF liability.

To work this out, see the Credit for interest on early payments calculator.

H2 Credit for tax withheld – foreign resident withholding (excluding capital gains)

Is the SMSF entitled to a credit for tax withheld through foreign resident withholding in Australia?

Do not include credits for amounts withheld from foreign resident capital gains withholding at H2. Include these at H8 Credit for amounts withheld from foreign resident capital gains withholding.

Write at H2 the total amount of tax withheld from payments to the SMSF that were subject to foreign resident withholding in Australia. Include at H2 the SMSF’s share of foreign resident withholding credits distributed to the SMSF from a partnership or included in a share of net income from a trust.

If a payer has withheld tax for foreign resident withholding from a payment to the SMSF, the payer must give the SMSF a payment summary that shows how much the payer withheld from its payments to the SMSF.

If you claim a credit at H2:

• you must include the corresponding gross payment at the appropriate item in section B
• you must complete a Non-individual PAYG payment summary schedule 2021.

The SMSF is entitled to a credit at H2 only if the amount was:

• withheld in Australia, and
• remitted to us.

For more information, see PAYG withholding.

H3 Credit for tax withheld – where ABN or TFN not quoted (non-individual)

Is the SMSF entitled to credits for tax withheld where it didn't quote its Australian business number (ABN) or tax file number (TFN)?

Write at H3 the total tax withheld from payments to the SMSF because the SMSF had not quoted its ABN or TFN.

If a payer has withheld tax from a payment to the SMSF because the SMSF did not quote its ABN or TFN, the payer must give the SMSF a payment summary that shows how much tax was withheld.

Do not include at H3:

• contributions that the SMSF received for a member who has not quoted their TFN (include these at R3 No-TFN-quoted contributions in section B)
• amounts withheld from payments because the SMSF did not provide its TFN to the trustee of a closely held trust (include these at H5).

If you claim a credit at H3:

• you must include the corresponding gross payment at the appropriate item in section B
• complete a Non-individual PAYG payment summary schedule 2021.

For more information, see PAYG withholding.

H5 Credit for TFN amounts withheld from payments from closely held trusts

Is the SMSF entitled to credits for TFN amounts withheld from payments from closely held trusts?

Write at H5 the total tax withheld from payments where the SMSF has not provided its TFN to the trustee of a closely held trust and the payment is subject to the TFN withholding rules.

If a closely held trust has withheld tax from a payment to the SMSF because the SMSF did not provide its TFN, the closely held trust must give the SMSF a payment summary that specifies how much it withheld from its payments to the SMSF.

If you claim a credit at H5:

• the corresponding gross payment must be included at the appropriate item in section B)
• you must complete a Non-individual PAYG payment summary schedule 2021.

For more information, see TFN withholding for closely held trusts.

H6 Credit for interest on no-TFN tax offset

Is the SMSF entitled to interest on no-TFN tax offsets?

If the SMSF has not claimed a no-TFN tax offset at E2, it cannot claim a credit at H6.

Write at H6 the total calculated interest amount of 50 cents or more for interest payable on the no-TFN tax offset claimed at E2 No-TFN tax offset. Do not include no-TFN tax offsets at H6 (include these offsets at E2 No-TFN tax offset).

Interest on the no-TFN tax offset is only payable if all the following occurred:

• the member of the SMSF provided their TFN to their employer before the end of a past income year
• the employer was required by section 299C of the Superannuation Industry (Supervision) Act 1993 (SISA) to inform the SMSF of the individual’s TFN by the end of the year, but did not do so
• contributions made for that member were no-TFN-quoted contributions in that past income year and the SMSF was required to pay additional tax (which is the interest bearing tax) on those contributions
• the SMSF claimed a no-TFN tax offset in 2020–21 for the additional tax paid on those no-TFN-quoted contributions in a past income year
• the no-TFN tax offset is applied when assessing the SMSF for 2020–21.

The rate of interest payable on the interest-bearing tax is the base interest rate determined under section 8AAD of the Taxation Administration Act 1953 (TAA). Table 8 at H1 Credit for interest on early payments – amount of interest provides the applicable interest rates for 2020–21.

Keep a record of the amount of interest payable on tax that counts towards the no-TFN tax offset. This interest is assessable income of the SMSF in the income year in which it is paid to the SMSF or credited against another SMSF liability.

For more information, see Interest on no-TFN quoted tax offset.

H8 Credit for amounts withheld from foreign resident capital gains withholding

Is the SMSF entitled to a credit for tax withheld through foreign resident capital gains withholding in Australia?

Write at H8 the total amount of tax withheld from payments to the SMSF that were subject to foreign resident capital gains withholding in Australia. Include at H8 the SMSF’s share of foreign resident capital gains withholding credits distributed to the SMSF from its share of net income from a trust.

You should only claim at H8 a credit equal to the amount of foreign resident capital gains withholding paid by a purchaser to the ATO on your behalf. The ATO would have issued you with confirmation of this amount.

Do not include credits for amounts withheld from foreign resident withholding at H8. Include these at H2 Credit for tax withheld – foreign resident withholding.

For more information, see Capital gains withholding: Impacts on foreign and Australian residents.

H Eligible credits

Is there an amount at:

• H1 Credit for interest on early payments – amount of interest
• H2 Credit for tax withheld – foreign resident withholding
• H3 Credit for tax withheld – where ABN or TFN not quoted (non-individual)
• H5 Credit for TFN amounts withheld from payments from closely held trusts
• H6 Credit for interest on no-TFN tax offset
• H8 Credit for amounts withheld from foreign resident capital gains withholding?

Continue to: I Tax offset refunds