Edited version of private ruling

Authorisation Number: 1011710391051

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Ruling

Subject: Superannuation Fund - Deductions

Question 1

Are the cost of preparing the financial accounts, audit fees and bank charges allowable deductions for a pension fund to the extent that they are incurred in gaining and producing assessable income?

Answer

Yes

Question 2

Are the cost of preparing and submitting your tax return an allowable deduction?

Answer

Yes

This ruling applies for the following period:

Financial year ending 30 June 2010

The scheme commences on:

1 July 2009

Relevant facts and circumstances

You are a self managed super fund.

You receive concessional contributions on behalf of the one of the members.

You have paid a sum of money for the cost of preparing financial accounts and for audit fees.

You have paid bank charges.

You have paid a sum of money to lodge your income tax return.

The taxable income declared by you for the financial year ending 2010 is $XX.

Reasons for decision

The tax deductibility of expenditure incurred by a superannuation fund is determined under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997) unless a specific deduction provision in the income tax law, such as section 25-5 of ITAA 1997 applies

Section 8-1 of the ITAA 1997 states that a deduction is allowable to the extent that it is incurred in gaining or producing assessable income or it is necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income.

A deduction will not be allowable if;

· It is a loss or outgoing of a capital nature; or

· It is a loss or outgoing of a private or domestic nature; or

· It is incurred in relation to gaining or producing exempt income or non-assessable non-exempt income; or

· A provision of the Income Tax Assessment Acts prevents it from being deducted.

Taxation Ruling TR 93/17 (TR 93/17) provides guidance on income tax deductions available to superannuation funds. Paragraph 4 of TR 93/17 outlines the typical expenses incurred by a superannuation fund that are ordinarily deductible under section 8-1 of the ITAA 1997. These include:

(a) actuarial costs

(b) accountancy fees

(c) audit fees

(d) cost of complying with the Occupational Superannuation Standards Act 1987 and Regulations

(e) trustee fees and premiums under an indemnity insurance policy

(f) costs in connection with the calculation and payment of benefits to members (but not the cost of the benefit itself)

(g) investment adviser fees and costs in providing pre-retirement services to members

(h) subscriptions for membership paid by a fund to The Association of Superannuation Funds of Australia Limited; and

(i) other administrative costs incurred in managing the fund.

Expenditure which is incurred partly in producing assessable income and partly in gaining exempt income must be apportioned as per paragraph 6 of TR 93/17.

A superannuation fund can deduct the amounts listed in paragraph 4 of TR 93/17 because they are working or operating expenses of the superannuation funds and an essential part of the cost of its operations. The deduction may need to be apportioned if the expenditure also relates to income other than assessable income.

Accountancy fees, audit fees and bank charges in relation to the fund are essential to the operation of the superannuation fund. You are entitled to a deduction for theses expenses to the extent that they are incurred in producing assessable income. As you have assessable income, you are entitled to a portion of these expenses under section 8-1 of ITAA 1997.

Section 25-5 of ITAA 1997 outlines that expenditure can be deducted to the extent that it is for managing your tax affairs or complying with an obligation imposed on the taxpayer by a Commonwealth law, insofar as that obligation relates to the tax affairs of an entity.

You have paid a sum of money to lodge your income tax return for the financial year ending 30 June 2010. This was done to manage your tax affairs. This expense will therefore be allowable in full as per section 25-5 of ITAA 1997.