SMSF: Deductible expenses

One of the downsides of running a self-managed super fund (SMSF) are the fees, but making sure you know what SMSF expenses are deductible can help you make the most out of your money.

Many expenses required for running an SMSF can be deductible unless they are related to gaining non-assessable income, such as exempt current pension income. Expenses that may be deductible include:

Management and administration fees:
These can include costs involved in preparing trustees’ minutes, postage fees and stationary, or other fees required for the running of an SMSF. If your fund earns both assessable and non-assessable income, then the costs can be apportioned. If the costs are completely incurred for the purpose of SMSF management and administration, such as obtaining an electronic service address to meet data standards requirement for the fund, then no apportionment is necessary.

Audit fees:
SMSFs require financial and compliance audits every year before lodging an annual tax return. The costs of getting an audit are deductible as they are associated with meeting lawful SMSF obligations. However, if your SMSF gains both assessable and non-assessable income, your audit expenditure must be apportioned accordingly.

ASIC annual fee:
The Australian Securities and Investments Commission (ASIC) annual fee required for your SMSF may also be tax deductible for corporate trustees – special purpose companies whose sole purpose is to act as a trustee of a regulated super fund.

Investment expenses:
Certain expenses relating to investment can also be tax-deductible for assessable income. If the investment-related advice covers non-assessable income, the fee can be apportioned. Some investment-related expenses include:

• Interest expenses
• Management fees or retainers paid to investment advisers
• Bank fees, rental property costs, brokerage expense or other expenditure related to your investment portfolio
• Investment adviser fees.

SMSF expenses that are not tax-deductible include:

• Fines for non-compliance
• Legal fees that are capital in nature
• Expenses incurred to gain assets backing tax-exempt income streams.