Your SMSF is treated same like almost other entities in Australia for the tax return purposes as if it earns income it has to pay tax every year. The tax rate for income in SMSF that is in accumulation phase is 15%. Mostly tax rates that apply to SMSFs are 0%, 10%, 15% and 45%. For the assets held by the SMSF if they are held at least a year on the sale of these assets discount will be applied on the capital gains which is 1/3rd. Once the taxable income is calculated and the rate of 15% or other applicable applied to the SMSF the imputed credits (franking credits) if available to SMSF can reduce or even eliminate the tax payable by the fund that can even result the tax refund from the tax office. The low tax rate incentive for SMSFs is provided by the government to its citizens to save for the retirement. The more accumulated in your SMSF during the working life the more you will have to use in your retirement. As government provides different means to fund retirement life of its people in the form of age pension, superannuation that is for retirement makes people self dependent to fund their life after retirement. Like any other entity in Australia SMSFs also need to comply with the tax rules set by the tax department. Breaching of any rules will result in penalties and fines will be imposed which will have direct impact on the retirement savings. As an example, late tax return lodgement penalty could you applied to the Self Managed Super Fund if the tax return is not lodged on time. As members of the SMSF run this trust structure for their own benefits they have the responsibility to make sure SMSF comply with the Superannuation rules and regulations and tax return must be lodged on time every year. SMSF members which are also the trustees of the fund and they have the decision making capacity to run this structure. As some people get it confused that SMSF activities will be reported in their personal tax return and no separate return will be lodged for the SMSF but this is not right. SMSFs have their separate tax return that need to be lodged with the tax office and its activities during the year like income, deductions, contributions will be reported in the relevant sections. SMSF is a separate entity and it should not be mixed with your personal returns. Yes, this is right that some activities from the SMSF return will be used when preparing the individual tax return. As an example, if an SMSF member made member concessional contributions during the year in the SMSF that they want to claim deduction in their personal tax return then these figures will be used when preparing the personal tax return. SMSFs tax rate in Australia is currently set as 15% if the fund is in accumulation phase. For some activities tax rate could be higher like for non-arm’s length income. Once the balance will be transferred to the pension phase and SMSF is in pension phase the tax rate will be 0%. But how much can be transferred to the pension phase depends on the members transfer balance cap. If the member has reached their transfer balance cap means the amount that can be transferred from the accumulation phase to the retirement phase any excess will stay in the accumulation phase and income related to that balance will be taxed at 15% rate. Once the tax return for the SMSF is prepared and audited it will be lodged with the Australian tax office and tax will be paid at the same time which will include the Super levy fee as well. Super levy is not paid separately each year. It is paid as part of the income tax payable of the Self Managed Super Fund. If there is refund for the year Super levy will the deducted from this and the net will be refunded to the SMSF. Tax refund will be deposited by the ATO in the SMSFs bank account, details of which will be provided to the ATO with the lodgement of the tax return as each SMSF has their separate bank account. If you have any question or need any help to understand how the tax rate apply to the SMSF please feel free to contact Superfund Warehouse.
