Superannuation is a tax concessional savings plans where employers, employees, members, self employed make contributions to save for the members retirement and concessional rates are provided to encourage to save for retired life. To say these as concessional means when contributions are made to SMSF or earnings from investments they are taxed at concessional rate and when at some stage after satisfying the condition of release of benefits pensions or lump sum payments are taxed at low rate or tax free.

Concessional contributions to fund

During the working life people save for their retirement to cover the cost of living when they are retired and in Australia Superannuation is the system or plan when Australians save for their retirement. That is why superannuation in Australia is called the most important asset for retirement. How much you will retired with depends on how much you have saved during your working life.

During the employees working life employer makes superannuation contributions to the members super account which is calculated at set rate by law. This is called superannuation guarantee contributions. Other people which are self employed or who have cap available might make member concessional contributions to the fund. Concessional contributions are taxed at 15% once received by the fund.

Non-concessional contributions to fund

Non-concessional contributions are out of pocket money which will not be taxed once received by Superfund.

Both types of contributions need to follow contribution cap rules every year.

Income from investments

If investments made by the self-managed super fund generates income it will be taxed at 15%. Also, if there is a capital gain from the disposal of the assets it will also be taxed at 15% if held for less than one year and 1/3rd discount applicable of held for more than a year.

Deductions in SMSF

Expenses paid for the management of the fund, to generate income in the fund are allowable deductions and can be claimed in the tax return. Some expenses are not deductible being SMSF set up costs, fines paid to Ato or ASIC others…

Also, some expenses like borrowing costs under LRBA are deductible over five years and not immediately like loan establishment costs under LRBA. Some expenses form part of the cost base of assets like bare trust set up cost which are capital in nature.

Which SMSFs need to lodge tax return?

Every self-managed super fund needs to lodge tax return every year except for the first year of the fund where no assets are held or no contributions or rollover received during the first year of the fund then the fund can request return not necessary from the tax office. Evidence needs to be provided to tax office when was the first asset held by the fund like SMSFs bank statement with deposit. If all criteria are satisfied Ato might allow first year as return not necessary. Make sure your SMSF return is lodged on time to avoid penalties and fines.

Due date for the lodgement of the return varies if its first year of the fund, existing fund, lodgement done by trustees or tax agents. If done through tax professional SMSFs get extra time for lodgement. For first year of the fund is 28th Feb of the next year after the end of the financial year and 15th May for existing fund.

Need help with SMSF tax return lodgment please feel free to contact professionals at SMSF tax return services.