Similar to owning a property in a personal capacity, an SMSF is required to pay tax on any income earned from investment property that it owns. The Fund is also allowed to claim certain deductions for expenses incurred.
Property Depreciation
An SMSF can claim depreciation expense for an investment property. Trustees can use the services of a quantity surveyor to prepare a property depreciation report. One such provider is BMT. To obtain a quote from BMT, please click on the button:
Repairs and Maintenance
If you own a property in a personal capacity you would know that a property requires a lot of maintenance and occasional repairs. The good news is that most repairs and maintenance expenses for an investment property held by an SMSF can be claimed as a deduction. However, if an SMSF purchased a property with loans, there may be some restrictions on the repairs and maintenance that can be undertaken. For more information, please see here:
Commercial Property
Most expenses incurred during the purchase and maintenance of a commercial property can be claimed as deductions in the SMSF’s Tax Return. It is considered good practice to retain a copy of the invoices relating to the expenses incurred by the property for audit file completeness. If the commercial property generates an annual turnover of more than $75,000, the Fund is required by the ATO to be registered for GST. For more information on GST, please click on the button below:
Residential Property
Similar to a commercial property, most expenses incurred for the repair and maintenance of a residential property may be claimed. Make sure the SMSF pays for the expenses in the Fund and an invoice is issued in the name of the SMSF.
Property Travel Expenses
When Trustees incur travel expenses for the sole purpose of the SMSF, being to inspect a new purchase or maintain an existing property, the SMSF can pay for this. However, only expenses relating to commercial property can be claimed as a tax expense. Travel for residential property can be paid for by the SMSF but a tax deduction is not allowed. Remember the expenses need to be reasonable as well.
For general rules and guidance on how to operate a property within an SMSF, see our page on SMSF Property Investment Rules.
