“We have noticed that there is still confusion about the structure and what deductions can be claimed, especially when the SMSF has invested in rental property”, he said.

H&R Block said areas to watch with SMSFs include income since the income derived from a rental property and other assets like shares must remain in the SMSF account and cannot be transferred to another entity.

In addition, trustees and their advisers should be aware that an SMSF can only borrow money under limited circumstances, and that tax deductions are limited.

“The SMSF is only entitled to claim as a tax deduction those expenses that are incurred to keep an investment property in a good state of repair, not improvements,” H&R Block stated.

“Re-modelling kitchens or bathrooms, or adding a deck or pergola, is not immediately deductible; however, this expenditure may be eligible for a deduction under the capital works provisions.”

Trustees and their advisers should also pay strict attention to the fact that no personal expenses of the members can be paid by the fund, and that no investments can be held for the personal use or enjoyment of the funds’ members.