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.