Expenses you can claim as an APRA fund

Operating expenses

Typical operating expenses that an Australian Prudential Regulation Authority (APRA)-regulated super fund may incur are deductible under the general deduction provisions. They're not deductible if they relate to gaining of non-assessable income or are capital in nature.

Typical operating expenses

Trustee support or general management expenses

• Trustee remuneration
• Premiums for trustee indemnity insurance policies
• Membership subscriptions to super associations (for example, Association of Superannuation Funds of Australia)

Administrative expenses

• Costs incurred in collecting contributions (for example, contributions processing)
• Benefit processing
• Member contact centre
• Intra-fund advice
• Insurance administration (for example, processing death and total permanent disability claims)

Marketing and business development

• Advertising and sponsorship
• Printing costs
• Member regular communication (for example, annual statements, product disclosure statements)
• Website maintenance

Complying with super law obligations

• Record-keeping requirements
• Reporting to APRA
• Accounting, actuarial or legal advice on complying with obligations under the super laws
• Obtaining an actuarial certificate for defined benefit pension purposes
• Complying with anti-money laundering and counter-terrorism financing rules
• Audit costs incurred in complying with APRA Prudential Standard SPS 310 Audit and Related Matters
• Staff training on changes to the fund's administration systems resulting from super law changes

Investment advice expenses

The exact nature of the investment advice expense is critical when determining deductibility under the general deduction provisions.

If the investment advice is part of the process of creating a new income-earning structure, it's a capital expense. For example, the super fund incurs an expense in obtaining investment advice on developing a new investment option. However, if the expense meets the parameters of business-related capital expenditure (or blackhole expenditure) it may be deductible over a 5-year period.

Where the investment advice is part of the process of earning gross income from investments, it's of a revenue nature. In addition, if there's no change in the objects or aims of an existing investment strategy, the investment advice expenses incurred form part of the income earning process and are considered deductible.

Examples of deductible investment advice expenses incurred by the trustee of the super fund include:

• ongoing management fees or retainers paid to investment advisers
• costs of servicing and managing an investment portfolio
• the cost of advice obtained by the fund in managing its investment strategy to change the mix of investments, whether by the original or a new investment adviser – provided it does not amount to a new financial plan.

If the investment-related advice covers other matters or relates in part to investments that do not produce assessable income, only a proportion of the fee is deductible.

For more information, see Business-related capital expenditure (blackhole expenditure).

Tax-related expenses

A specific deduction is allowable for an expense (that isn't a capital expense) incurred in managing tax affairs or complying with a Commonwealth law obligation imposed on the trustee of a super fund. This is to the extent the obligation relates to the entity's tax affairs.

Examples of deductible tax-related expenses incurred in managing a super fund’s income tax affairs and complying with income tax laws include:

• preparation and lodgment of the fund’s income tax return
• actuarial costs incurred in satisfying income tax obligations (for example, to determine the amount of tax-exempt income or exempt current pension income).

Generally, you can't deduct capital expenditure under the tax-related expenses specific deduction provision. However, for this purpose expenditure isn't capital expenditure merely because the tax affairs concerned relate to matters of a capital nature. For example, the trustee of a super fund can deduct expenditure it incurs in applying for a private ruling on whether it can depreciate an item of property.

Tax-related expenses don't need to be apportioned on account of the super fund deriving non-assessable income.

Super supervisory levy

As noted at paragraph 5(a) of Taxation Ruling TR 93/17 Income tax: income tax deductions available to superannuation funds, the super supervisory levy payable by APRA-regulated super funds is deductible as a tax-related expense.

However, the late payment penalties for the super supervisory levy are not deductible.

Financial assistance levy

The financial assistance levy payable by APRA-regulated super funds is deductible. The levy doesn't need to be apportioned where a super fund is gaining assessable and non-assessable income.

The levy helps fund the Australian Government's program providing financial assistance to APRA-regulated super funds that have suffered loss through theft or fraud.

Death, disability, terminal illness and income protection insurance premiums

A specific deduction for insurance premiums is available to the trustee of a complying super fund. This is for premiums paid for insurance policies that are for current or contingent liabilities to provide death or disability benefits.

A deduction is available for the insurance premiums to provide for:

• super death benefits
• terminal medical condition benefits
• disability super benefits
• benefits provided due to temporary inability to engage in gainful employment for a specified period.

A disability super benefit means:

• the benefit is paid to a person because he or she suffers from ill-health (whether physical or mental)
• 2 legally qualified medical practitioners have certified, because of the ill-health, it's unlikely the person can ever be gainfully employed in a capacity for which he or she is reasonably qualified because of education, experience or training.

A trustee is prohibited from providing insured benefits that aren't consistent with the conditions of release in the Superannuation Industry (Supervision) Regulations 1994 (SISR) for death, terminal medical condition, permanent incapacity and temporary incapacity.

The prohibition doesn't apply to members who joined a fund before 1 July 2014 cand were already covered for that insured benefit prior to that date, or to benefits provided under an approved arrangement. This may require certain amendments to be made to the fund rules, or the rules may be taken to be amended (see Regulation 4.07D of the SISR).

Amount you can claim

The proportion of an insurance premium a super fund may deduct depends on the type of insurance policy.

The deduction paid by the trustee of a complying super fund doesn't need to be apportioned on account of the fund deriving non-assessable income.

Insurance policies other than whole-of-life or endowment

For insurance policies that aren't whole-of-life or endowment policies, you can claim:

• the part of a premium specified in an insurance policy as being wholly for the liability to provide certain death, terminal medical condition or disability benefits for fund members
• the proportion of the premium being attributable to the liability to provide death or disability super benefits for fund members
• for a policy that is not a whole-of-life or endowment policy
  • 30% of the part of an insurance policy premium that's specified in the policy as being for a distinct part of the policy that would've been a whole-of-life policy if it had been a separate policy
  • 10% of the part of an insurance policy premium that's specified in the policy as being for a distinct part of the policy that would've been an endowment policy if it had been a separate policy.

Insurance premium proportions deductible under ITAA 1997

For insurance premium proportions deductible under item 6 of the table in subsection 295–465(1) of the Income Tax Assessment Act 1997 (ITAA 1997), funds can deduct for Total and permanent disability (TPD) insurance cover:

• TPD any occupation cover* 100%
  • with one or more of the following inclusions
    • activities or daily living
    • cognitive loss
    • loss of limb
    • domestic (home) duties.
• TPD own occupation cover** 67%
  • with one or more of the following inclusions
    • activities of daily living
    • cognitive loss
    • loss of limb
    • domestic (home) duties.
• TPD own occupation cover bundled with death (life) cover 80%
  • with one or more of the following inclusions
    • activities of daily living
    • cognitive loss
    • loss of limb
    • domestic (home) duties.

*TPD any occupation means insurance against the member suffering an illness or injury that is likely to result in the member’s permanent inability to work in a job for which the member is reasonably qualified by education, training or experience.

**TPD own occupation means insurance against the member suffering an illness or injury that is likely to result in the member’s permanent inability to work in the member’s own occupation (other than in a substantially reduced capacity).

Whole-of-life and endowment insurance policies

For whole-of-life and endowment insurance policies, you can claim:

• 30% of the premium for a whole-of-life policy if all the individuals whose lives are insured are members of the fund
• 10% of the premium for an endowment policy if all the individuals whose lives are insured are members of the fund.

For more information, see:

• ATO ID 2009/100 Complying superannuation fund: deductibility of premiums on 'whole of life policy' – subsection 295–465(1) of the ITAA 1997
• TR 2012/6 Income tax: deductibility under subsection 295–465(1) of the Income Tax Assessment Act 1997 of premiums paid by a complying superannuation fund for an insurance policy providing Total and Permanent Disability cover in respect of its members.