What expenses can I claim in my SMSF?

Like any other taxpayer tax-deductible expenses incurred by a Self-Managed Super Fund (SMSF) are deductible under the general deduction provisions of the Income Tax Assessment Act 1997 (Tax Act) unless a specific deduction provision applies, or a specific deduction provision applies not allowing the expense as a tax deduction.

Expenses of a Self-Managed Super Fund include:

• SMSF Setup costs – initial trust deed, initial investment strategy and corporate trustee
• operating costs – administration, accounting fees and audit fees
• investment expenses – management fees, adviser fees, rental expenses, borrowing expenses in relation to a limited recourse borrowing arrangement (LRBA)
• tax related expenses – ATO supervisory fees, actuarial fees in relation to calculating the fund’s pension exempt income and tax agent’s fees
• member insurances – member’s life insurance, total and permanent disability and income protection insurance
• updating the fund’s trust deed
• change of trustee

Not all of the above expenses are allowed as a tax deduction. To assist you in understanding when a SMSF can include an expense as a tax deduction please refer to our summary.

The general deduction provisions allow a SMSF to deduct from their assessable income any loss or outgoing to the extent that it is incurred in gaining or producing an SMSF’s assessable income provided it is not a loss or outgoing of a private or capital nature.

A SMSF expense which is of a capital nature include the acquisition of listed shares, managed funds, property, collectables, derivatives, gold and other precious metals as well as cash, term deposits and bonds.

A general deduction is not allowed if it is incurred in relation to gaining or producing the fund’s tax-exempt income. Where SMSF expenses are incurred in producing both assessable and exempt income the expense has to be apportioned.

A typical example of an SMSF’s tax-exempt income is income arising from a member’s pension account (in retirement phase). The income arising from a transition to retirement pension (TRIS) is taxable and therefore expenses in relation to a TRIS do not have to be apportioned.

Specific tax deductions for a SMSF include tax-related expenses, member insurance premiums that provide death or disability benefits, and some borrowing costs. Tax-related expenses and member insurance premiums are fully allowable, even if they relate partly or wholly to tax-exempt income from retirement phase pensions. Examples of tax-related expenses are:

• the Australian Taxation Office (ATO) supervisory fee
• preparation and lodgement of an SMSF annual return
• cost of actuarial certificate to determine the exempt current pension income (ECPI)
• costs associated with an ATO audit

Specific expenses which are not tax deductible for a SMSF typically include:

• ATO late lodgement penalties for a SMSF annual return
• late lodgement penalties for ASIC annual review fee for a SMSF corporate trustee

When is the SMSF expense incurred?

A SMSF expense is not allowable as a tax deduction unless it is “incurred”. Generally, when the fund has been invoiced is when the expense is incurred.  An expense invoiced on 20^th June 2024 but not paid until the 5^th of July 2024 may be deductible in 2024 even though it is not physically paid until the 2025 financial year. An end of year tax planning strategy is to either prepay the fund’s accounting fees or have your administrator or accountant invoice the fund prior to 30^th June.

Hint – It is also crucial to ensure an SMSF expense is also an appropriate cost to pay in accordance with the superannuation laws and the fund’s governing rules. Any outgoing must also align with the sole purpose test.

Deductible Expense Summary	Type of Deduction	Partly paying a pension* apportion the expense
General operating costs i.e. general accounting fees audit fees and ASIC annual fees for corporate trustee	General	Yes
Advisor fees relating to ongoing management of investments which are income-producing	General	Yes
Obtaining an annual valuation for audit purposes	General	Yes
Updating the trust deed to reflect legislative changes	General	Yes
Actuarial fees to determine ECPI	Specific	No
ATO Supervisory Levy	Specific	No
Costs incurred in relation to an ATO audit	Specific	No
Fees in relation to managing income tax affairs	Specific	No
ATO GIC and shortfall interest charge (not tax deductible from 1 July 2025)	Specific	No
Member’s life insurance premiums	Specific	No
Depreciation of capital assets including capital works	Specific	No
LRBA – borrowing costs such as loan establishment fees, valuation fees, title searches etc.	Specific**	Yes
LRBA – establishing a bare trust used to hold the title to an asset	Not tax deductible***	N/A
Establishment fees of a SMSF i.e. trust deed or cost of establishing a corporate trustee	Not tax deductible***	N/A
Advisor fees for ongoing management of investments which are capital in nature i.e. shares which only produce capital gains	Not tax deductible***	N/A
Updating the trust deed which is more than reflecting legislative changes i.e. enable change of trustee structure or allow borrowing under a LRBA	Not tax deductible***	N/A
Changing a trustee to an individual trustee or to a corporate trustee – costs includes Incorporating a company to act as trustee of the fund	Not tax deductible***	N/A
Subscriptions or courses for a trustee’s education to commence a property investment or share trading	Not tax deductible ****	N/A
Advisor fees – initial advice or initial investment strategy	Not tax deductible ****	N/A

Hint – A SMSF generally can’t deduct expenses when it is in 100% pension mode. Specific deductions like the ATO supervisory levy and life insurance premiums are allowed. However, these deductions typically cancel out any carried forward tax losses as they are added back against the net exempt income.

*Relates to a retirement phase pension (an account-based pension)

**The expense is deductible over a 5-year period

***The expense is capital in nature

****The expense is incurred too early to be connected with the income