Q: Can the set-up cost of a Corporate Trustee be deducted in an SMSF?
A: No, we capitalise this cost.
Q: Can it be amortised over 5 years?
A: The 5-year deduction is only available if “running a business”. Best practice for SMSF’s is to include as expense in accounts then adjust (add back) in tax return as a tax deduction is not available to the Fund.
The capital expenses of setting up a Superannuation Fund (e.g. establishing a Corporate Trustee) does not qualify for the ITAA 1997 s40-880 deduction as the SMSF is not carrying on a “business” in the usual sense, even though it is “producing” assessable income predominantly from its investments and taxable contributions (ATO interpretative Decisions ID 2003/524, ID 2003/525: precedential views in respect of expenditure incurred before 1 July 2005).
The ATO’s view about establishing a Superannuation Fund is also found in Taxation Ruling IT 2672. Whilst IT 2672 is specifically about the deductibility of costs of amending a Superannuation Fund Trust Deed, its principles will apply equally to the establishment costs of an SMSF given they are of the same purpose and nature.
Is the amortisation on the formation/ establishment costs tax deductible? The answer is NO.
The default way we set up an SMSF is with Individual Trustees. We charge a fixed Setup Fee of $450 for Individual Trustees.
A: Yes, over either lower of 5 years or the term of the loan. This would be classified as a borrowing expense, similar to loan application fees, legal fees etc.
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Superannuation Warehouse is based in Melbourne and have clients throughout Australia. We deliver our SMSF administration services in an efficient and paperless way. This efficient service means a competitive fee to you. Our low ongoing fees will enable you to take control of your Super.
Superannuation Warehouse is an accounting firm and do not provide financial advice. All information provided has been prepared without taking into account any of the Trustees’ objectives, financial situation or needs. Because of that, Trustees are advised to consider their own circumstances before engaging our services.