The income of a self managed superannuation fund consists of interest, dividends, rental receipts and distributions from managed trusts, just to name a few.
The types of incomes are assessed to a super fund and other taxpayers depending on the type of income and in some cases, when it is received.
Interest revenue is assessed only when it is received by the fund. If the amount of money is added to a term deposit on a rollover, then it is deemed paid to the fund.
Dividends are assessed when the dividend is deemed to be paid by the company, regardless of whether the fund has actually received it into its bank account. So if the company declares the dividend on the 28 June 2011, but pays it on the 1 July 2011, it’s not assessable until the 2012 financial year.
Trust distributions on the other hand are assessable when declared to be distributed, which can be months before it’s actually paid. And the amount that is assessable can be vastly different to the amounts actually paid to the fund. For example, the fund may have paid only 3 quarters of their distributions before the 30 June and the 4th amount is paid in say August of the following year; the August payment can form part of the assessable income in the previous financial year.
Also, the distributions may include amounts such as tax deferred or tax free components. Tax deferred amounts mean they are monies paid which are effectively reducing the capital cost of the initial investment. So this type of income is effectively deferred until the investment is sold. Tax free amounts are never going to be assessable.
The distributions may include capital gains which have been derived by the trust fund, and these can be subject to discounts if the investment sold was held for more than 12 months. A SMSF can get up to 1/3 discounted on these capital gains.
Rental receipts need to be assessed on when the amounts are paid, if reporting on a cash basis. If the superfund elects to report on an accruals basis, then it will be assessable when the rental income has been earned. For example, if a tenant is in a current lease and misses 1 month’s payment, if on an accrual basis, you would declare that month’s rent even if not received. If on a cash basis, then you wouldn’t declare it until it was paid. Most funds report on a cash basis.
It is a requirement that the super fund receives its income which is due to the fund. If you are approached to redirect your superfund income monies let’s say into a charity fund, be aware this is prohibited. A super fund is required to collect its income and is not entitled to redirect this income as it would be deemed a breach of the rules. If you have been approached in this way, do not be fooled into gifting away superannuation monies.
Superannuation fund income is assessable normally at 15%, unless the fund has all or a portion of the fund in pension phase, and then the tax rate can be reduced to Nil%. You need to ensure the superfund collects its income due.