A Self-Managed Super Fund (SMSF) costs money before it has any of its own. For starters, you will need a trust deed, possibly a company to register, and advice along the way. So, who pays the initial costs: you or the fund?
The ATO says either. You can pay for SMSF establishment costs yourself or from the fund. If you pay personally, before or after the fund exists, the fund can reimburse you, and the ATO says to request reimbursement as soon as the fund has cash available. If you decide not to request a reimbursement, the amounts paid may be assessed as personal contributions made to the SMSF.
How you pay changes how the payment is treated. If you pay before the SMSF legally exists, the payment isn’t a contribution, and you can request reimbursement from the fund as soon as it has cash available.
If you pay after it exists and the fund reimburses you, that isn’t a contribution either. However, if you pay after the fund is set up and never ask for the money back, you must treat the amount as a contribution because you’ve paid a fund expense and increased its capital. Contributions have their own rules and limits, so this is easy to get wrong.
Not every bill qualifies. The fund can only charge costs that are reasonably considered expenses of the fund. The ATO’s examples include preparing the trust deed, establishing a corporate trustee, ASIC registration fees, and legal, administrative or advice costs directly related to setting up the fund.
It is also important to note:
- Establishment costs are capital expenses, so the SMSF cannot claim a deduction for them.
- If you choose a corporate trustee, ASIC charges a registration fee and an annual review fee, with a lower annual fee when the company acts only as trustee of an SMSF. Trustees can’t be paid for their trustee duties either, even if they did the setup work themselves.
When establishing an SMSF, it is critical that you discuss your proposed fund with a financial adviser and your accountant before you set anything up. They can help you choose a sensible payment method, ensure the paperwork matches, and confirm an SMSF suits you in the first place. A financial adviser will also develop the fund’s investment strategy. Give us a call on [phone number] to book a time to discuss what you need to consider when setting up an SMSF. You can find out more on the ATO website Choose your SMSF trustee structure | Australian Taxation Office
