Whether it is common expenses, such as accounting fees and establishment costs, or the more outlandish such as flights, accommodation, laptops and expensive software programs, the simplest way to work out if it is appropriate for your SMSF to pay a particular expense is to ask two questions:
- Is the payment allowed under your trust deed and the superannuation law?
- Will the payment be tax deductible?
What does superannuation law say?
Remember the sole purpose test? That is the requirement that any decision you make in relation to your SMSF should be made for the sole purpose of providing retirement benefits to members. Any expense that provides a current benefit to members – say a personal computer, training course or holiday that you want now but can’t afford personally – should not be paid from your super fund.
The sole purpose test is sometimes also known as the ‘sniff’ test! If the expense looks personal or excessive in relation to the size of the fund, it is likely to get some extra attention.