There are two types of taxable income – income of a revenue nature and income of a capital nature. Note that capital losses can’t be offset against revenue gains for the calculation of taxable income. Capital losses are quarantined and can only be utilised against capital gains.

When an SMSF goes into pension mode, all gains become tax free, so the Fund won’t pay any tax on its SMSF income. The objective of the SMSF is to move into a tax-free environment.

Generally, tax rates are lower in Superannuation than in other environments; therefore, there is usually an advantage to put more money in Superannuation Funds.


The SMSF bought BHP shares at $10 per share. If the SMSF keeps this until retirement phase and sell the share at $45, the total gain of $35 will be tax-free.

Question: My SMSF has $10,000 from bank interests, but the SMSF investment portfolio (shares) is down to $4,000. Can the SMSF offset losses from the portfolio against the bank interests if the SMSF sells the shares?

Answer: Short answer – NO. Shares are held on capital account and losses on capital account will be quarantined. Only capital gains can be applied against these losses. Interest is of a revenue nature and will be taxed at 15%. Expenses offset against this cannot be of a capital nature. You can deduct bank fees, accounting and auditing costs.

Annual Tax Returns

If you are a client of Superannuation Warehouse, we act as your Tax Agent to complete and submit your SMSF tax return. If your SMSF use a registered Tax Agent like Superannuation Warehouse, the SMSF gets an extension to submit its tax return. The Tax Return is generally due 15 May the following calendar year, i.e. 10.5 months after the year end.

For a copy of SMSF annual tax returns and instructions on how to complete the tax return for recent years, click on the links below.

SMSF Supervisory Levy

The SMSF Supervisory Levy  for the 2020 financial year is $259 per annum for an SMSF. The Supervisory Levy is payable to the ATO when you lodge your annual return.

Pay As You Go (PAYG)

Pay As You Go (PAYG) Instalments is a system for paying instalments during the income year towards an SMSF’s expected tax liability on the income. The PAYG instalments for the financial year are credited against the annual tax assessment to determine whether the Fund owes more tax or are owed a refund.


When an SMSF is newly set up and there are no transactions in the SMSF at 30 June of that financial year, the Trustee of the Fund need to provide us a confirmation noting the SMSF first received a rollover/contribution into the SMSF bank account in the next financial year. Superannuation Warehouse can request the ATO to approve a RNN (Return Not Necessary). This is to advise the ATO that there are no transactions in the SMSF and the Trustee has intention of operating the SMSF in the following financial year. The ATO gives some guidance on how to complete a RNN. Remember, the RNN, can only be submitted once. In the following year if there are still no transactions in the SMSF, the SMSF has to be closed down.

SMSF Annual Return: Avoid these top five errors

The ATO has listed five most common errors that are identified in the lodgement of SMSF annual returns.

1. Not including a bank account in the Fund’s name

The Bank Account of the SMSF must be under the name of the SMSF and separate from the Trustees’ individual bank accounts. This Bank Account details must be included in the annual tax return. Please click here for more information on how to set up an SMSF bank account.

2. Providing an incorrect electronic service address (ESA)

An ESA is a data format which allows the SMSF to receive electronic remittance advice and contributions if the Members are receiving super from non-related employers. Please click here for more information on how to obtain a SuperStream code.

3. Not valuing SMSF assets at market value

All Assets in the SMSF must be reported at market value as at 30 June. Valuations can be conducted by Trustees and we explain how to value SMSF assets here

4. Trying to lodge with zero Assets

The Trustee can request the ATO to approve a return not necessary (RNN), if an SMSF is yet to receive contributions or rollovers in the SMSF’s first year. The ATO will not accept a tax return from an SMSF that has no assets unless the fund is being wound up.

5. Incorrect or no Auditor details in Tax Return

The SMSF must have the financial statements and records audited each year by an approved SMSF external Auditor prior to lodging the Tax Return. Please click here for more information on Auditor independence. 

Transferring funds from the retail fund to your SMSF is basically not a tax-avoiding strategy. For more information on tax-avoidance schemes, please see here.

As a Registered Tax Agent, we complete tax returns for the Funds we administer. We always make sure to follow ATO guidelines to ensure an effective year end process. For more information on the services we offer, please follow this link.

FAQs on SMSF Tax Returns and Audits

Questions and Answers – Click on the question to reveal the answer

1. Can my SMSF pay the PAYG instalments on an annual basis?

Generally, PAYG intalments are remitted to the ATO quarterly. However, some SMSF’s have the option to pay instalments annually when certain conditions are met. Generally, if an SMSF has taxable income of less than $8,000, the Fund can elect to pay its PAYG annually.

2. How is the amount of PAYG calculated?

The ATO can work out the PAYG instalments amount based on an SMSF’s previous financial activities. At the end of each quarter, they will send Trustees the PAYG summary for the period and payment instructions.

3. How can I vary the amount on the PAYG instalments obligation?

The ATO uses an SMSF’s previous year taxable income to calculate the PAYG instalments for the current Financial Year. However, if Trustees believe that the PAYG instalments amount of the SMSF for the period is incorrect, they can notify the ATO about the changes in the SMSF with a revised activity statement. For more ATO’s examples about this topic, click here.

4. When can I lodge the amendment to the ATO?

The amendment must be done prior to the due date of the Fund’s first quarterly activity statement of the current financial year. Otherwise, you must wait until the following financial year.

FAQs on SMSF Accounting

Questions and Answers – Click on the question to reveal the answer

My SMSF has overseas investments. Are there any risks to consider?

Exchange rates are volatile. If the investment is in cash or cash equivalent, big movements in currencies within a short period of time can result in substantial losses.

Management can be difficult. Some assets might require Trustee’s physical presentation and management so it can be unsustainable investments.

What is the accounting approach used for overseas cash or trading accounts?

AUD is presentation currency for SMSF financial reports. All overseas assets valuation and transactions are required to be translated to AUD. Generally, any foreign exchange gain or loss is recorded as assessable income or general deduction.

Due to the high volume of transactions, our accounting approach is to follow the list of exchange rates from ATO website for daily transactions. We also use the rate on 30 June for year-end valuation and FX gain and loss calculation for the fiscal year. This is slightly different from the tax rules; however, it is deemed as immaterial.

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