Managing a Self-Managed Super Fund (SMSF) comes with responsibilities, and one of the most overlooked is understanding which fund expenses are tax-deductible. Getting it right ensures you meet your obligations and avoid overpaying on your SMSF tax.
Just like any other entity, an SMSF can claim deductions on expenses—but only if those expenses comply with superannuation and tax laws.
Understanding SMSF Tax Rules
SMSFs are taxed at a concessional rate of 15% on earnings such as investment income and contributions. However, this tax treatment only applies if the fund is complying with ATO requirements.
Generally, SMSF tax deductions are only allowed for expenses incurred in gaining or producing assessable income. This means:
- Expenses related to capital acquisition (like the cost of buying an asset) are not deductible
- Deductions may vary depending on whether the fund is in the accumulation or pension phase
Accumulation vs Pension Phase: How Deductibility Changes
Whether your SMSF is in the accumulation or pension phase also impacts which expenses can be claimed.
- Accumulation Phase: If your fund is still building wealth and earning taxable income, many expenses incurred in generating that income are deductible.
- Pension Phase: If the fund is paying pensions and the income is exempt from tax, then the related expenses are generally not deductible. However, exceptions include:
- The superannuation supervisory levy is paid to the ATO
- Insurance premiums that meet super law requirements
- Costs involved in collecting and processing member contributions
If your fund operates in both phases, you’ll need to apportion expenses between taxable and non-taxable income. An actuarial certificate is usually required—unless you’re using the segregated method—to determine the deductible portion accurately.
What SMSF Expenses Are Tax-Deductible?
Here are the most common SMSF tax-deductible expenses:
a) Operating and Management Expenses
- Accounting and SMSF tax return services
- SMSF audit fees (required annually)
- Fees for actuarial certificates (for mixed-phase funds)
- Trustee administration activities, like minutes preparation and processing member contributions
- ASIC annual review fees (for corporate trustees)
- ATO supervisory levy
Note: ATO penalties are not deductible and must not be paid using SMSF funds.
b) Investment Expenses
- Property-related costs (management fees, council rates, insurance, repairs)
- Bank fees tied to investment activities
- Interest on limited recourse borrowing arrangements (LRBAs)
- Other expenses relating to investments
c) Trust Deed Update Costs
- Costs incurred to update the SMSF trust deed in response to legislative changes are deductible.
- Initial SMSF setup costs, however, are not deductible.
d) Insurance Premiums
- Premiums for cover such as life or total and permanent disability (TPD) are deductible when paid in line with superannuation law.
What SMSF Expenses Are Not Tax Deductible?
Here are some expenses that cannot be claimed against your SMSF tax liability:
- SMSF setup costs
- Legal fees for adding a new member to the fund
- Penalties or fines for non-compliance
- Any expenses solely related to exempt income (e.g. pension-only phase funds without actuarial adjustment)
Key ATO Reference: TR 93/17
ATO ruling TR 93/17 provides a detailed list of allowable SMSF deductions and should be consulted by trustees and advisors when reviewing fund expenses.
Let the SMSF Specialists Handle It
At autoSMSF, we specialise in helping trustees navigate every aspect of SMSF compliance—from SMSF setup to tax returns, deductions, audits, and beyond. Our expert Self-Managed Super Fund accountants work directly with you to ensure your fund is not only compliant but running as efficiently as possible.
Need help with your SMSF tax return or understanding your fund’s deductions? Get in touch with us today.
