Key highlights

  • ATO guidance, last updated on 21 October 2026, sets out the deductible expenses a complying self-managed super fund (SMSF) can claim.
  • Most SMSF expenses are assessed under the general deduction provision in section 8-1 of the Income Tax Assessment Act 1997, while others, such as the supervisory levy, fall under specific provisions.
  • Expenses must be apportioned where a fund earns both assessable and non-assessable income, and capital costs, such as establishing a fund or making lasting changes to its structure, are not deductible.

The Australian Taxation Office (ATO) has updated its guidance on the deductible expenses of self-managed super funds, setting out which costs a complying SMSF can claim and how they are treated for tax. The guidance, last updated on 21 October 2026, covers operating costs, the supervisory levy, tax-related and legal expenses, investment costs, member insurance premiums and the rules for apportioning expenses between assessable and non-assessable income.

The ATO states that before a particular expense is paid from the fund, the payment should be made in accordance with a properly formulated investment strategy and be allowed under the trust deed and superannuation laws.

The general deduction rules

According to the ATO, the tax deductibility of most expenses incurred by an SMSF is determined under the general deduction provision in section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997). Under those rules, an SMSF can claim a deduction for expenses that are either incurred to earn the fund’s assessable income or necessarily incurred in running a business for the purpose of gaining or producing assessable income, and that are not related to personal or capital matters.

The ATO notes that the general deductibility rules do not apply where a specific deduction provision applies, and that a fund cannot claim more than one deduction for the same cost. If two or more tax provisions allow a deduction for the same cost, the deduction is available only under the most appropriate provision.

Two specific provisions are highlighted: section 25-5 of the ITAA 1997, covering the costs of managing the fund’s tax affairs or complying with a tax-related obligation, such as the SMSF supervisory levy, and section 295-465, covering death, total and permanent disability, terminal illness and income protection premiums to the extent specified in the relevant law.

When expenses can be claimed

As a general rule, the ATO says the trustee can claim the fund’s expenses in the year the trustee incurs them. The exception is the decline in value of certain depreciating assets, such as plant and equipment, which is claimed over the effective life of the asset.

The guidance sets out record-keeping points: wherever possible the expense should be paid directly from the SMSF’s bank account, invoices and receipts should be in the name of the SMSF, invoices and receipts should be retained as evidence, and the deduction should be claimed only once.

Operating, supervisory levy and tax-related expenses

Operating expenses are mostly deductible under the general deduction provision. Examples given include management and administration fees, audit fees and the Australian Securities and Investments Commission (ASIC) annual fee. Audit costs that relate to meeting obligations under super laws are deductible, but must be apportioned if the SMSF gains or produces both assessable and non-assessable income. For funds with a corporate trustee, the ASIC annual fee is deductible by the fund.

The supervisory levy is a flat amount that is deductible under section 25-5. The same section allows a deduction for expenses incurred in managing a fund’s tax affairs, including preparing and lodging the SMSF’s annual return and the related financial statements or actuarial costs. The ATO says it does not require SMSFs to apportion the cost of the annual return between income tax and super law requirements, and allows it in full.

Legal expenses and trust deed amendments

Legal expenses incurred in complying with income tax obligations are covered by section 25-5, and other legal expenses are generally deductible under the general provision unless they relate to non-assessable income or are capital, private or domestic in nature. Trust deed amendments to facilitate the ongoing operations of the fund are generally deductible, but not where the amendment results in lasting changes to the SMSF’s structure or function or creates a new asset.

The guidance includes worked examples. In one, a fund pays a legal firm $500 to update a deed that refers to repealed super provisions and out-of-date trustee addresses, and the cost is deductible as an ordinary incident of the fund’s day-to-day running. In another, a fund incurs $1,000 to amend its deed so a corporate trustee can be appointed after a member’s death, and the ATO says the cost is capital in nature and not deductible. A third example says that amending a deed to add borrowing powers for a limited recourse borrowing arrangement is an enduring change to the fund’s function and is also not deductible.

Investment expenses and member insurance

Deductible investment expenses listed by the ATO include interest, ongoing management fees or retainers paid to investment advisers, the costs of servicing and managing a portfolio, such as bank fees, rental property expenses and brokerage fees, and the cost of advice to change the mix of investments, provided the changes do not lead to a new financial plan. Where advice covers other matters or relates partly to investments that do not produce assessable income, only a proportion of the fee is deductible.

For collectables and personal use assets such as artwork, insurance costs are deductible if the items are insured in the name of the fund within seven days of acquisition and the fund is the owner and beneficiary of the policy. Storage costs are deductible only if the items are stored in line with the relevant regulation and the trustees keep records of their reasons for the storage decision.

Complying funds can also claim a deduction for premiums for insurance that provides death or disability benefits to members, in line with the income tax law, with no apportionment needed for these premiums.

Non-deductible expenses and apportionment

The ATO states that expenses incurred in establishing a fund or making lasting changes to its structure or function are capital in nature and not deductible. Costs of establishing an SMSF, of acquiring a capital asset, and of administrative penalties levied on a trustee are not deductible, and penalties must not be paid or reimbursed from the fund’s assets.

Where a fund earns both assessable and non-assessable income, such as exempt current pension income, expenses must be apportioned. Where a distinct and severable part of an invoice relates to assessable income, that part can be claimed: in one example, a $2,000 invoice identifies $500 as relating to a segregated pension asset, so $1,500 is claimable. Where an expense cannot be divided, the fund must estimate a fair and reasonable proportion. Examples include a $1,500 audit fee apportioned by an actuary’s 30% assessable figure to give $450, a $1,500 fee apportioned by income ($60,000 of $160,000) to give $562, and a $1,500 fixed fee apportioned by a 40% exempt percentage to give $900. The ATO’s Taxation Ruling TR 93/17 provides examples of methods the Commissioner may accept.