Which SMSF Expenses Are Tax Deductible? A Trustee’s Guide

Running a self-managed super fund (SMSF) can be incredibly rewarding—but it also comes with a fair bit of admin. One area that often causes confusion is tax deductibility. What can your SMSF claim as a tax deduction, and what’s off-limits?

Let’s break it down in a way that’s practical, detailed, and easy to follow.

Start with the Basics: What Makes an Expense Deductible?

Here’s the golden rule: for an expense to be tax deductible, it must relate to your SMSF earning taxable (assessable) income.

That means things like:

• Investment earnings (interest, dividends, rent, capital gains)

• Employer contributions

• Personal contributions where a tax deduction has been claimed

If the expense helps the fund generate this kind of income, it’s usually deductible. But if it relates to non-taxable income—like earnings from assets supporting retirement-phase pensions—it’s not.

And if your SMSF is buying assets (like property or shares), those costs are considered capital expenses, which are also not deductible.

Accumulation vs Retirement Phase: Why It Matters

This is where things get a bit more technical.

If your SMSF has members in both accumulation and retirement phases, you’ll need to split expenses proportionally between taxable and non-taxable income. This isn’t something you can eyeball—it requires an actuarial certificate to calculate the correct split.

For example, if 60% of your fund’s income is taxable and 40% is from pension-phase assets, only 60% of most expenses can be claimed as a deduction.

There are exceptions though. You don’t need to split expenses related to:

• Collecting and processing member contributions

• Insurance premiums paid on behalf of members

Everything else? You’ll need to apportion it.

Let’s Dive Into the Deductible Categories

Here’s where things get interesting. SMSF expenses fall into several categories, and each has its own quirks.

Operating Expenses

These are the bread-and-butter costs of running your SMSF.

1. Administration and management fees: These cover the day-to-day running of the fund, like processing contributions and maintaining records.

2. Audit fees: Every SMSF must be audited annually by an approved auditor. These costs are fully deductible.

Investment-Related Expenses

This category is broad—and often misunderstood.

• Ongoing adviser fees: If you’re paying an adviser to manage your fund’s investments, those fees are deductible. But be careful—initial financial plans, general advice, and upfront fees are not.

• Bank fees: If your SMSF has a bank account (and it should), those fees are deductible.

• Rental property expenses: If your fund owns investment property, you can claim costs like maintenance, property management, and council rates.

• Brokerage fees: Buying and selling shares? Those transaction costs are deductible.

• Interest on SMSF loans: If your fund has borrowed under a limited recourse borrowing arrangement (LRBA), the interest is deductible.

• Depreciation: If your SMSF owns assets like commercial property with plant and equipment, you can claim depreciation over time.

• Seminars and subscriptions: If they relate directly to managing the fund’s investments, they’re deductible. Just make sure they’re relevant and not general financial education.

Tax-Related Expenses

These are the costs of staying compliant with the ATO.

• Preparation of financial statements and annual returns: These are essential and fully deductible.

• Actuarial fees: If your fund has pension-phase members, you’ll need an actuary to calculate exempt income. That cost is deductible.

Insurance Premiums

Your SMSF can take out insurance on behalf of members—but only certain types.

Deductible insurance includes:

• Life insurance

• Income protection

• Total and permanent disability (TPD) – but only if it’s “any occupation”

• Terminal illness cover

Not deductible: Trauma insurance and health insurance. SMSFs aren’t allowed to hold these types of cover for members.

Statutory Fees and Levies

These are the fees you pay to regulators.

• ATO supervisory levy: This is charged annually and is deductible.

• ASIC fees: If your SMSF has a corporate trustee, you’ll pay ASIC registration and annual review fees. These are deductible—but only if the company exists solely to act as the SMSF trustee.

Legal Expenses

Some legal costs are deductible, but not all.

• Deductible: Amending your trust deed to stay compliant with legislation, or legal advice related to tax obligations.

• Not deductible: Costs to set up the fund or significantly change the trust deed later on.

Collectables and Artwork

If your SMSF owns collectables or artwork, you can claim:

• Storage costs

• Insurance premiums

But there are strict rules. The insurance must be in the trustee’s name, and it must be taken out within seven days of acquiring the asset.

How to Claim These Expenses

Claiming is straightforward—if you follow the rules.

• Pay expenses directly from the SMSF’s bank account

• Make sure receipts and invoices are in the fund’s name

• Keep records for at least five years after lodging your annual return

Depreciation is the only exception—it’s claimed over the life of the asset, not in the year it’s purchased.

What You Can’t Claim

Here’s a quick list of expenses that might seem deductible—but aren’t:

• Costs related to non-taxable income

• Legal fees for setting up the SMSF

• Capital expenses, like buying assets

• ATO penalties: These must be paid personally by trustees. The SMSF can’t reimburse you, and you can’t claim them.

Understanding which expenses your SMSF can claim is crucial—not just for tax efficiency, but for compliance. The ATO takes a strict view, and mistakes can be costly.

If your fund is in both accumulation and pension phase, or if you’re unsure about a particular expense, it’s worth getting professional advice. And always keep good records—because when it comes to SMSFs, documentation is everything.

Ready for Personalised SMSF Advice?

If you’ve found this article helpful and you’re looking for an adviser who keeps you informed, explains things clearly, and offers practical guidance like this—why not get in touch?

I offer one-on-one consultations from our Gold Coast and Melbourne City offices, and I’d love to help you make the most of your SMSF. Due to our current waiting list, appointments are available from 15 Sept 2025 onwards.

Just click Schedule Now to view available times and book your session.

And if you know someone else managing their own super—whether it’s a friend, colleague, or family member—feel free to pass this article on. It might be just what they need to stay on track.

Pay it forward!