What is taxable in a SMSF?

Income of the SMSF is taxable, including:

• concessional contributions, such as employer contributions, salary sacrifice contributions, personal contributions where a tax deduction is claimed
• income from investments, such as interest earned, dividends, distributions, rent
• capital gains on disposal of assets.

What is the superannuation rate of taxation?

Taxable income is taxed at 15% when the SMSF is in accumulation phase. Capital gains are taxed at 15%, reducing to 10% for assets held for 12 months or more.

Income from capital supporting retirement phase pension are exempt from income tax, and capital gains are disregarded.

Where the SMSF has both accumulation and retirement phase assets, an actuarial certificate is required to determine the proportion of the SMSF's income that is exempt from income tax.

Concessional contributions are taxable even when the SMSF is partly or wholly in retirement phase.

When is a member in retirement phase?

A person meets the definition of retirement phase when they have satisfied a condition of release with Nil cashing restrictions – such as attaining age 65, or retirement on or after preservation age.

What is retirement on or after preservation age?

The definition of retirement depends on the person’s age.

In the case of a person who has reached a preservation age that is less than 60 –

• an arrangement under which the person was gainfully employed has come to an end; and
• the trustee is reasonably satisfied that the person intends never to again become gainfully employed for 10 hours or more each week.

In the case of a person who has attained the age of 60 – an arrangement under which the member was gainfully employed has come to an end, and either of the following circumstances apply:

• the person attained that age on or before the ending of the employment; or
• the trustee is reasonably satisfied that the person intends never to again become gainfully employed for 10 hours or more each week.

Is income earned on capital supporting a transition to retirement pension exempt?

From 1 July 2017, transition to retirement pensions are classified as accumulation phase assets. Therefore, the earnings on transition to retirement pensions are not exempt from income tax.

Is there any tax charged when commencing an income stream (pension)?

There is no tax event on commencing a pension. Furthermore, gains accumulated prior to commencing a pension are also not taxed when disposed in retirement phase. For example, capital gains from shares bought when you were in accumulation phase, then sold after you commence retirement phase income stream is tax free. If the whole fund is not in retirement phase, the part that is in accumulation phase is taxable.

Are all superannuation entities taxed the same?

All superannuation entities, including SMSF, are subject to the same rate of taxation. SMSF provides you the ability to better manage taxation.