This article will explore the types and nature of expenses that can be claimed as a deduction by Self- Managed Funds (SMFs).
There are certain types of expenses that can be deductible according to the Taxation Ruling 93/17. Generally, this rule depends upon the type of income, if it’s an assessable or non-assessable income (such as exempt current pension income “ECPI”). Non-accessible income can be classified as expenses that are capital in nature and are thus non-deductible.
Expenses that are deductible according to the Taxation Ruling 93/17 include the following:
- Actuarial costs
- Accountancy fees
- Audit fees
- Cost of complying with SIS (unless the cost is a capital expense)
- Trustee fees and premiums for an indemnity insurance policy
- Cost in connection with calculation and payment of benefits to members.
- Investment and adviser fees and costs.
- Subscriptions for membership are paid by a fund to industry bodies.
- Other administrative costs incurred in managing the fund.
Certain conditions state whether a general deduction is permissible or not especially when a specific deduction provision is absent. These types of deductions depend on the following factors such as if an expense has been incurred in gaining/producing assessable income or if it has been incurred in carrying on a business with the intention of gaining/producing assessable income.
To conclude, it is important to note that any gains that are capital in nature, investment related and seminar type expenses, courses, and subscriptions cannot be claimed as a deduction since they are classified as capital gains and not ordinary income under section 51AAA of the ITAA 1936.