Lesson 5 - Recording Income, Expenses and Disposals

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Objective

To record income, expense and capital gains transactions for the purposes of reconciling the exempt pension income calculation for taxation.

Overview

Exempt Pension Income

• Income derived from current pension assets is exempt from 15% Income Tax and will be written back as ‘exempt pension income’ on the tax return.

• Capital gains on disposals are non-assessable so will be written back as a permanent difference.

Linked Income Accounts

Simple Fund only includes linked income accounts in the calculation of exempt pension income. The income account must be linked to an investment account that the fund holds at least one unit in.

To check if an income account is linked, you can either:

1. from the Chart of Accounts, edit the Investment and click , Links or

2. from the Simple Fund Explorer, click Account Enquiry and select the Investment account

If you are reconciling the Create Entries Report Calculation of Exempt Pension Income section, and an income account does not appear in the exempt income listing, then the most likely cause is that a link has not been created between the asset and the income account.

Expenses – Taxation Ruling 93/17

Trustees and administrators of SMSF should be aware of the interaction of Taxation Ruling 93/17 - Income tax deductions available to superannuation funds, which deals with exempt income and the apportionment of expenditure. Briefly the ruling specifies that expenditure incurred solely in gaining or producing exempt income is not deductible and that expenditure incurred partly in producing assessable income and partly in gaining exempt income must be apportioned. TR 93/17 provides several methods of how apportionment of deductible and non-deductible expenditure can be calculated. The correct method for apportioning expenditure depends on the circumstances of the fund.

Simple Fund allows you to record the percentage of non-deductible expenses in Fund Details | Reporting under Expenses Percentage.

Learning tasks

Record the following income transactions for the BGL Training Fund.

Task 5.1 - Recording Exempt Income

Task 5.2 - Recording Exempt CGT Disposal

Record the following disposal, calculating the nominal capital gain, and record the cash receipt.

Task 5.3 - Recording Partly Deductible Expenses