• I1 and I2 Investment expenses

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    Did the SMSF incur expenses of a revenue nature in managing or maintaining its investments?

    No

    Leave I1 and I2 blank. Go to J1 and J2.

    Yes

    Read on.

    Write at I1 and I2, as required, the amount of expenses (of a revenue nature) that the SMSF incurred in managing or maintaining its investments.

    Deductible investment expenses

    Write at I1 the deductible amount of investment expenses.

    Do not include at I1 investment expenses (or any part of such expenses) that relate to earning:

    There are special rules for the deductibility of expenses relating to investments in pooled superannuation trusts and life insurance policies – see Investments in pooled superannuation trusts (PSTs) and life insurance policies.

    If the SMSF pays an income stream (pension) to a member, refer to How are expenses treated when an SMSF has ECPI? before you claim a deduction for the SMSF's investment expenses.

    Non-deductible investment expenses

    Write at I2 the amount of investment expenses that are not deductible. This includes an amount of investment expense to the extent the expense is incurred for the purposes of earning exempt income, such as exempt current pension income.

    Example 'SMSF with no ECPI': Investment expenses

    SMSF I has no exempt current pension income, foreign income or non-arm's-length income.

    In 2014–15, SMSF I paid a total of $400 for annual investment manager fees.

    SMSF I reports:

    I1 Deductible investment expenses $400

    I2 Non-deductible investment expenses (Blank)

    End of example

     

    Example 'SMSF with ECPI': Investment expenses

    SMSF II pays an income stream to one of its three members and some of its income is exempt from income tax under the exempt current pension income rules.

    In 2014–15, SMSFII paid a total of $400 for annual investment manager fees.

    Using the rules described at How are expenses treated when an SMSF has ECPI? SMSF II determines that $100 of the fees relates to earning its exempt current pension income.

    SMSF II reports:

    I1 Deductible investment expenses $300

    I2 Non-deductible investment expenses $100

    End of example

    Investments in pooled superannuation trusts (PSTs) and life insurance policies

    Complying SMSFs can claim deductions for expenses they incurred to acquire, hold or dispose of:

    • units in a PST
    • life insurance policies issued by life insurance companies
    • interests in trusts whose assets consist wholly of such life insurance policies.

    The SMSF can claim the expenditure as a deduction if the expenditure would qualify for deduction under the provisions of the ITAA 1936 or the ITAA 1997 if any profits, gains or bonuses received from the investments listed above that are not assessable income were instead included in assessable income.

    Do not include amounts at I1 or I2 if you can more appropriately include them at F1 or F2.

    The SMSF cannot deduct amounts for investment charges that the PST or life insurance company deducts from the gross contributions transferred to it from the SMSF. These charges are not deductible because they are capital expenditure (since they reduce the amount of the investment).

    See also:

    Last modified: 15 Jan 2016QC 44344