Yes, an SMSF can generally reimburse a member for establishment costs that were initially paid out of their personal funds—provided that the reimbursement is for legitimate trustee expenses and there are no restrictions in the fund’s trust deed preventing it.
These establishment costs typically include expenses such as the preparation of the trust deed, incorporation of a corporate trustee, and other legal or administrative documentation necessary to set up the SMSF. Once the SMSF has a bank account and has received rollover funds, it may reimburse the member, assuming all documentation is in place and the payment is properly accounted for.
Important note: While reimbursement is allowed in these circumstances, SMSF establishment costs are considered capital in nature and are not tax-deductible. This means that although the fund can pay back the member, it must not claim these expenses as deductions in its tax return—they should be added back for tax calculation purposes.
Example:
John sets up an SMSF and pays $2,000 from his personal account for the legal documentation and registration of a corporate trustee. A month later, the SMSF opens a bank account and receives a rollover of $200,000 from John’s industry super fund. The SMSF can reimburse John the $2,000 from its bank account, assuming the trust deed allows such reimbursements and proper records are maintained. However, when lodging the fund’s tax return, this $2,000 must not be claimed as a deduction.
As always, it’s important to consult a qualified SMSF specialist or your accountant to ensure compliance with the SIS Act and ATO guidelines.
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