Validation Error
This Validation Error occurs when the current exempt pension income is greater than zero. It indicates that the SMSF has exempt income and expects non-deductible expenses to be recorded for that income.
How to resolve the Validation Error
The ATO expects that if there is current exempt pension income, there should also be non-deductible expenses.
However, in some funds, there may not actually be any non-deductible expenses. To resolve this validation error, you can do one of the following:
- Record a $1 transaction as Bank Charges and recreate the entries so the validation passes.
- Manually enter $1 in the tax return under Other Amounts L2 and select the code O – Other expenses not listed elsewhere
Either option will allow the SMSF Annual Return to validate successfully while meeting the ATO’s requirements.