The ATO recently updated their Taxation Ruling TR93/17 which covers income tax deductions that are available to superannuation funds. It is important you are aware of the different types of expenses and their deductibility within your self-managed super fund.
Generally speaking, a deduction is a loss or outgoing incurred by a super fund in the process of gaining assessable income.
When and how can you claim?
As a general rule, you can claim expenses within your fund in the year that they are incurred. However, deductions for the decline in value of certain depreciating assets (such as plant and equipment) are claimed over the effective life of the asset rather than at the time that you incur the expenditure. Commonly, expenses are deductible when your fund pays the expense rather than when an invoice is received. This is because SMSFs usually operate on a cash receipts basis. Invoices and receipts must be retained as evidence of the expense, in the name of your SMSF, and wherever possible, the expense should be paid directly from your fund’s bank account.
Generally, if an expense is incurred which relates to both accumulation and super income stream based income, the expense must be apportioned so that only the proportion of the expense for the production of assessable income is claimed. In other words, as income from a super income stream or exempt current pension income (ECPI) is not taxable, expenses relating to the income stream are not deductible.
Common fund expenses include:
Operating expenses are general deductions relating to the operation of your SMSF. Examples of operating expenses include:
- Management and administration fees – costs associated with the daily running of your fund such as preparing trustees’ minutes.
- Approved SMSF Auditor fees.
- ASIC annual fee.
The nature of the investment-related expenses is critical in determining their deductibility:
- Interest expenses, ongoing management/advisor fees, bank fees, rental property expenses, brokerage fees are deductible as they are part of the day to day expenses involved in running your fund.
- The cost of advice to draw up a new investment strategy or new financial plan for purposes such as long term financial strategy is a capital outlay which involves establishing or making enduring changes to your fund’s structure can be expensed but are not deductible.
These are expenses incurred in managing your fund’s tax affairs or complying with Commonwealth tax law. Examples include costs relating to the preparation and lodgement of your SMSFs annual return including financial statements and actuarial costs. These are deductible.
Statutory fees and levies
SMSFs are liable to pay a supervisory levy, which is $259 in the 2017-18 financial year for continuing funds.
- A deduction can be claimed under the specific deduction for such things as loan establishment fees, valuations, property and title searches fees.
- Trust deed amendment costs incurred in establishing a trust, executing a new deed or increasing the scope of the deed are generally capital in nature and can be expensed but not deducted.
- Trust deed amendments required to facilitate to the ongoing operations of the SMSF are deductible under the general deduction provision. For example, an amendment to keep up with changes to super law.
A specific deduction is available in relation to insurance premiums but depending on the type of insurance it will depend how much of that expense that can be claimed within the fund. The table below details what percentage of each premium can be claimed within your fund:
Total & Permanent Disablement (‘Any’) with life cover
Total & Permanent Disablement (‘Any’ occupation)
Total & Permanent Disablement (own occupation)
Total & Permanent Disablement (own) with life cover
Take the next steps with your SMSF Specialist
We highly recommend that you gain the advice of an SMSF Specialist in order to maximise the expenses from which you can claim deductions within your fund. If you already utilise the services of an accountant, they should be well qualified in the expenses your fund can claim. However, it is vital you present all relevant expenses for their consideration. To find your nearest SMSF Specialist, use our Find a Specialist function.