I1 and I2 Investment expenses

 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.

I1 Deductible investment expenses

Write at I1 the deductible amount of investment expenses.

The exact nature of the investment related expenses is critical in determining deductibility. Examples of deductible investment related expenses include:

• interest expenses
• ongoing management fees or retainers paid to investment advisers
• costs of servicing and managing an investment portfolio such as bank fees, rental property expenses, brokerage fees
• the cost of advice 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 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 Investment related expenses.

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

• foreign income (see Expenses that relate to foreign income)
• non-arm's length income (see Expenses that relate to non-arm's length income)

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 retirement phase superannuation income stream benefits to a member, refer to How expenses are treated when an SMSF has ECPI before you claim a deduction for the SMSF's investment expenses.

I2 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.

 

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).

Legislation

Section 295-100 of the Income Tax Assessment Act 1997

Continue to: J1 and J2 Management and administration expenses