Support Query

How do I reconcile the Net Capital Gains amount on my Tax Return?

Overview

To Reconcile the Net Capital gain amount, the following reports can be used:

How does SF360 calculate Net Capital Gains ? 

The Create Entries Process does the following to calculate Net Capital gains: 

1. Total Current Year Capital Gains from Disposals and Trust Distributions. 
   1. For Gains using the Discounted Method, this is before discount. Discount is not applied until losses are applied. 
   2. Capital Gains from Assets Segregated Pension Assets are ignored. 
2. Current Year Capital Losses and Capital Losses Carried forward from previous years are applied
   1. Capital losses are applied against capital gains in the following order: capital gains other, capital gains indexation method and then capital gains discount method
   2. If your total capital losses for the year exceed your total capital gains a net capital loss position is created. Unapplied losses will be carried forward to later income years. 
   3. Capital Losses from Assets Segregated Pension Assets are ignored. 
   4. There is no time limit on how long you can carry forward a net capital loss.
3. Calculate the CGT discount applying the discount percentage – of 33.33% for complying superannuation entities to the Total Discounted Gain remaining after applying losses. 
4. Net Capital Gain = Total Current Year Capital Gains less Current Year Capital Losses and Capital Losses Carried forward from previous years less discount

What effect do capital gains and capital losses have on an SMSF's claim for ECPI?

The effects of capital gains and capital losses are different for segregated and unsegregated assets.

If your SMSF only has segregated current pension assets, you should ignore any capital gains or capital losses resulting from the disposal of these assets. If the disposal of a segregated current pension asset results in a capital loss, this loss must not be offset against any other capital gain earned by the SMSF.

Where all SMSF fund members are receiving a pension and the combined account balances of these pensions is equal to the market value of the fund's total assets, in effect, all assets of the fund will meet the requirement of being 'segregated' as they have the sole purpose of paying super income stream benefits. In this situation, the ATO will accept that the SMSF is not required to identify individual assets as being dedicated to funding a super income stream benefit.

If your SMSF has unsegregated current pension assets, you need to factor in capital gains and capital losses. For unsegregated current pension assets, capital losses that arise are not included as deductions when you calculate assessable income. If your SMSF has a net capital loss, it can be carried forward each year until it can be offset against an assessable capital gain. The SMSF's capital gain less any capital losses equals the net capital gain. The net capital gain is added to the SMSF's assessable income before working out how much of income is tax exempt, as per the actuarial calculation for the relevant year.

Capital Gains Reconciliation Report

The Capital Gains Reconciliation Report has been added to the Investment reports section of Simple Fund 360. This report will detail:

• Losses available for offset;
• Capital Gains;
• The application of losses and CGT discounts;
• Net Capital Gain for the fund;
• Net capital losses carried forward to later income years.

Refer to Capital Gains Reconciliation Report

Capital Gains Schedule

The Capital gains schedule can be used to confirm the capital losses and the CGT discount that is used to offset against the current year capital gains.

The amounts appearing under 1: Current year capital gains and capital losses in the Capital Gains Schedule are broken down in the Realised Capital Gain Report.

To View the Capital Gains Schedule:

Select Capital Gains Schedule.

Realised Capital Gains Report

The Realised Capital Gains Report will display the various capital gains and losses which have been received during the financial year. This includes the capital gain/losses that have occurred as a result of an investment disposal and those that have been received from an income distribution. To Prepare, refer to the Realised Capital Gains Report help. 

The amounts under the Tax treatment section of this report can be reconciled with the amounts appearing in the Capital Gains Schedule.

Distribution Reconciliation Report

The Distribution Reconciliation Report will reconcile all Capital Gains received via a Trust Distribution (Account 23800)

Refer to Distribution Reconciliation Report

No Capital Gains displaying on the CGT Schedule or SMSF Annual Return.

Where all SMSF fund members are receiving a pension and the combined account balances of these pensions is equal to the market value of the fund's total assets, in effect all assets of the fund will meet the requirement of being 'segregated' as they have the sole purpose of paying super income stream benefits  (Fund is 100 % pension).

Capital gains or capital losses from a capital gains tax event in relation to a segregated current pension asset are disregarded on the SMSF Annual Return. Please review the Fund Pension Policies.

For more detail please check out the ATO Website.