What expenses can be paid by the SMSF?
Expenses can only be paid for by the SMSF where they relate to running the SMSF and the receipt for the expense is in the name of the SMSF. In addition, the expense cannot have an element of personal use. That is notwithstanding that an expense is incurred in the running of your SMSF, you cannot pay for the expense with your SMSF if there is an element of personal use. For example someone may purchase a computer to use for their SMSF. Given that the computer is also likely to be used for other private purposes it cannot be paid for by your SMSF given there is an element of private use. Additionally, you cannot pro-rata expenses based on SMSF usage, in the same way as you can with your Individual Tax Return. In the above example this means that if you use the computer 80% for the SMSF and 20% for personal use, the SMSF still cannot pay for that expense or claim any part of the expense (even the 80%) because there is an element of personal use. Below are some specific expenses with commentary on whether the SMSF can pay for them.
Accounting Fees
Yes. You can have your SMSF pay for this expense and the expense will be tax deductible to the SMSF. The receipt for this expense will be automatically issued by ESUPERFUND in the name of the SMSF.
Supervisory Levy
Yes. You can have your SMSF pay for this expense and the expense will be tax deductible to the SMSF. The receipt for this expense will be automatically issued by the ATO in the name of the SMSF.
Subscriptions
Yes. You can have your SMSF pay for this expense and the expense will be tax deductible to the SMSF. The receipt for the expense must be in the name of the SMSF. A copy of the receipt evidencing that the expense is in the name of your SMSF will be requested at financial year end as part of the annual compliance process.
Newsletters
Yes. You can have your SMSF pay for this expense and the expense will be tax deductible to the SMSF. The receipt for the expense must be in the name of the SMSF. A copy of the receipt evidencing that the expense is in the name of your SMSF will be requested at financial year end as part of the annual compliance process.
Seminars
Yes. You can have your SMSF pay for this expense and the expense will be tax deductible to the SMSF. The receipt for the expense must be in the name of the SMSF. A copy of the receipt evidencing that the expense is in the name of your SMSF will be requested at financial year end as part of the annual compliance process.
Life Insurance
Yes. You can have your SMSF pay for this expense and the expense will be tax deductible to the SMSF. The Life Insurance Policy must be in the SMSF Name with a specified Member named as the Insured person otherwise you cannot pay this expense from your SMSF. If you have an existing policy in your personal name you cannot have SMSF pay for this expense. A copy of the receipt evidencing that the expense is in the name of your SMSF will be requested at financial year end as part of the annual compliance process.
Total & Permanent Disability Insurance
Yes. You can have your SMSF pay for this expense and the expense may be tax deductible to the SMSF. The TPD Insurance Policy must be in the SMSF Name with a specified Member named as the Insured person otherwise you cannot pay this expense from your SMSF. If you have an existing policy in your personal name you cannot have SMSF pay for this expense. A copy of the receipt evidencing that the expense is in the name of your SMSF will be requested at financial year end as part of the annual compliance process.
Income Protection Insurance
Yes. You can have your SMSF pay for this expense and the expense will be tax deductible to the SMSF. The Income Protection Insurance Policy must be in the SMSF Name with a specified Member named as the Insured person otherwise you cannot pay this expense from your SMSF. If you have an existing policy in your personal name you cannot have SMSF pay for this expense. A copy of the receipt evidencing that the expense is in the name of your SMSF will be requested at financial year end as part of the annual compliance process.
Trauma Insurance
No. Trauma Insurance covers things like heart attack, stroke etc, and are paid as a lump sum payout. It is not recommended that Trauma Insurance is arranged through an SMSF. This is because in the event of a payout there are no provisions in the Super Laws to allow a Member to access the Insurance Payout unless a Condition of release is met (such as Retirement). Trauma Insurance should only be taken out in a Member's personal name to ensure you can access it when you need it.
Insurance for Assets
Yes. Clients in some cases will need to insure their SMSF Assets. You can have your SMSF pay for this expense and the expense will be tax deductible to the SMSF. The receipt for the expense must be in the name of the SMSF. A copy of the receipt evidencing that the expense is in the name of your SMSF will be requested at financial year end as part of the annual compliance process.
Storage for Assets
Yes. You can have your SMSF pay for this expense and the expense will be tax deductible to the SMSF. The receipt for the expense must be in the name of the SMSF. A copy of the receipt evidencing that the expense is in the name of your SMSF will be requested at financial year end as part of the annual compliance process.
Share Trading Courses
Yes. You can have your SMSF pay for this expense and the expense will be tax deductible to the SMSF. The receipt for the expense must be in the name of the SMSF. However we caution that the expense must be reasonable. That is if you have a Super Benefit of $20,000 and you spend $10,000 on a Share Trading Course, this would represent 50% of your Super Benefit and would not be considered reasonable. A copy of the receipt evidencing that the expense is in the name of your SMSF will be requested at financial year end as part of the annual compliance process.
Share Trading Software
Yes. You can have your SMSF pay for this expense and the expense will be tax deductible to the SMSF. The receipt for the expense must be in the name of the SMSF. However we caution that the expense must be reasonable. That is if you have a Super Benefit of $20,000 and you spend $10,000 on Share Trading Software, this would represent 50% of your Super Benefit and would not be considered reasonable. A copy of the receipt evidencing that the expense is in the name of your SMSF will be requested at financial year end as part of the annual compliance process.
Property Expenses
Yes. You can have your SMSF pay for this expense and the expense will be tax deductible to the SMSF. The receipt for the expense must be in the name of the SMSF. A copy of the receipt evidencing that the expense is in the name of your SMSF will be requested at financial year end as part of the annual compliance process.
However, if your SMSF owns a vacant land and has no intention to build any substantial and permanent structures on the land, the ongoing expenses in relation to the land, such as council rates and loan interest, will not be tax deductible because the land does not generate income. Instead these expenses will be added to the cost base of the land for the purposes of calculating the capital gain or capital loss when the land is sold. A copy of the receipt evidencing that the expense is in the name of your SMSF will be requested at financial year end as part of the annual compliance process.
Company Trustee Setup
Yes provided the corporate trustee is a special purpose company established and maintained with the sole function of acting as the Trustee of your SMSF. However, this expense that is incurred in establishing an SMSF's structure is capital in nature and the expense will not be tax deductible to the SMSF. A copy of the receipt evidencing that the expense is in the name of your SMSF's corporate trustee will be requested at financial year end as part of the annual compliance process.
ASIC Annual Fee
Yes provided the corporate trustee is a special purpose company established and maintained with the sole function of acting as the Trustee of your SMSF. Where the sole purpose of the company is to act as Trustee for an SMSF (for a "special purpose") the annual ASIC review fee is $63 per annum compared to $310 per annum for a company that is not a "special purpose" company. You can have your SMSF pay for this expense ($63) if the company is for “a special purpose” and the expense will be tax deductible to the SMSF. The annual statement for this expense will be issued by the ASIC in the name of the corporate trustee. A copy of the annual statement evidencing that the expense is in the name of your SMSF’s corporate trustee will be requested at financial year end as part of the annual compliance process.
Computer
No. You cannot have your SMSF pay for this expense. Given that the computer is also likely to be used for other private purposes it cannot be paid for by your SMSF given there is an element of private use. Additionally, you cannot pro-rata expenses based on SMSF usage, in the same way as you can with your Individual Tax Return. This means that if you use the computer 80% for the SMSF and 20% for personal use, the SMSF still cannot pay for that expense or claim any part of the expense (even the 80%) because there is an element of personal use.
Travel
No. You cannot have your SMSF pay for this expense. Given that the travel is also likely to be used for other private purposes it cannot be paid for by your SMSF given there is an element of private use.
Reimbursements
In some cases, you may need to pay for an SMSF expense with personal funds. This may be because the expense or Investment must be paid for by credit card for example and it is not possible to do this with your SMSF. It is preferable that expenses or SMSF Investments are not paid with personal funds. However where this is unavoidable then it is possible for you to pay an expense on behalf of the SMSF. In this case you must ensure that the receipt for the expense or Investment is in the name of the SMSF. If that is the case, you can reimburse yourself for the expense or Investment. The reimbursement should however happen soon after the personal payment (preferable limited to only several days).