Advisers need to be mindful of when they claim tax deductions on expenses incurred by SMSFs in light of total super balance (TSB) restrictions imposed by the 2016 budget super reforms.
DBA Lawyers director Dan Butler told an SMSF online update webinar last Friday when dealing with incurring expenses, SMSFs can deduct from their assessable income any loss or outgoing to the extent that it is incurred in gaining or producing assessable income.
However, Butler warned the way SMSF trustees claim deductions can have considerable impact on their TSB.
“For instance, coming up towards the end of the year you might have fees, that is, an adviser fee. You may have insurance premiums. And it may be that by discharging these pre-30 June, the amount will then not show up in the total super balance come 1 July next year,” he said.
“So there could be this added incentive not only to get the tax deduction in this financial year, but also the impact on each member’s TSB by being quick with getting your invoice out.”
He also pointed to Taxation Ruling 93/17 and cautioned that where members have a pension and a super fund, there is a methodology in that ruling as to how they can claim expenses.
“Broadly if expenses relate solely to the pension assets, then it should not be deductible. If the expense is like an overhead expense, then there’s prorating,” he noted.
He also addressed dangers that lie within salary sacrifice arrangements, where cases and tribunal decisions on excess contributions showed some of those contributions were made via electronic funds transfer, BPay or cheques.
“One decision, in Davenport v FCT [2012] AATA 760, the cheque was received by the fund pre-30 June, but the employee ID was received in the next few days. And the fact that the super fund could not associate the cheque with the employee resulted in an excess contribution. So be very careful about those finer points,” he noted.
