How APRA Funds Deduct Section 40-880 Costs

When can an APRA-regulated fund use the five-year write-off?

An APRA-regulated super fund may be able to claim a five-year deduction where a capital cost meets the parameters for business-related capital expenditure, also called blackhole expenditure. The Australian Taxation Office says the deduction is available over five years from the year incurred, rather than necessarily as an immediate general deduction.

The starting point is to identify whether the outgoing is capital or capital in nature. The ATO says that deciding whether an expense is capital requires consideration of all the circumstances of the expense. This classification work matters because an expense that is capital in nature may need consideration under section 40-880 instead of the general deduction provisions.

The ATO's capital-expenses guidance was last updated on 20 November 2025. On that guidance, the relevant write-off period is five years, with the first portion beginning in the income year the expenditure is incurred. These are the two key timing facts a practice should carry into its workpapers and year-end review.

The ATO states: "These expenses are deductible over a period of 5 years, starting in the year the expense is incurred." That statement concerns costs which meet the business-related capital expenditure parameters; it does not turn every capital payment made by a fund into a deductible amount.

Which capital costs need closer review?

Trust deed amendments, merger-related expenditure and investment advice costs can require a closer capital-versus-revenue analysis for an APRA-regulated fund. The ATO gives examples in which legal costs to amend a trust deed, merger-related expenses and investment advice expenses may be deductible over five years if they meet the business-related capital expenditure parameters.

For example, the ATO describes a public offer fund whose existing trust deed did not allow it to offer a product meeting MySuper requirements. If that fund is carrying on a business, the ATO says a deduction over a five-year period may be available for legal expenditure that is capital in nature.

That example should not be applied mechanically. The ATO's separate guidance on fund expenses lists accounting, actuarial and legal advice on complying with super-law obligations among typical operating expenses, while also making clear that the exact nature of an expense is important. A description such as “legal fees” is therefore not enough for a reliable tax treatment.

The ATO identifies investment advice expenses as an area where the exact nature of the expense is critical. Its guidance also notes that an expense meeting the business-related capital expenditure parameters may be deductible over five years.

How must the deduction be apportioned?

If an APRA-regulated super fund derives both assessable and non-assessable income, its deduction for eligible business-related capital expenditure spread over five years must be apportioned. The ATO expressly links the apportionment requirement to mixed-income funds, so a practice should retain the basis used to divide the deduction for each income year.

This is where an otherwise correct five-year schedule can still produce an incorrect tax position. A practice needs to distinguish the total qualifying capital expenditure from the amount that is deductible in each year, then separately consider the fund's income profile for that period.

The source material does not prescribe a universal percentage or calculation method for every fund. It does, however, establish the rule that apportionment is required where assessable and non-assessable income are both derived. Recording the income character, supporting calculations and explanation for the chosen treatment gives the reviewer a clear trail.

The cost of getting the treatment wrong is an unsupported deduction position: a fund may claim an amount immediately when it should be spread over five years, omit required apportionment, or fail to claim a potentially available amount at all. The practical response is to resolve the expense classification before the return is finalised, rather than relying on a broad ledger label.

What should a practice check before finalising the return?

Before finalising an APRA-regulated fund's tax work, identify the expense, establish the income year it was incurred, assess whether it is capital in nature and test whether it meets the business-related capital expenditure parameters. For a mixed-income fund, calculate and document the required apportionment across the five-year deduction period.

1. Extract legal, merger, trust deed, investment advice and other unusual project costs from the general ledger.
2. Obtain invoices, engagement letters, board papers and descriptions showing what each amount related to.
3. Assess whether the cost is capital or capital in nature using the circumstances of the expenditure.
4. For eligible business-related capital expenditure, create a five-year schedule beginning in the year incurred.
5. Check whether the fund derived assessable and non-assessable income and document the apportionment applied.
6. Keep the analysis with the return workpapers for review and future-year continuity.

The ATO's broader APRA-fund material separates fund reporting and administration from management guidance, which is a useful reminder that tax treatment should sit within a documented fund process. The ATO provides APRA-regulated fund guidance covering services, reporting, administration and fund management.

How DeskMate can support the evidence-gathering work

DeskMate can help practices organise the repetitive evidence-gathering behind this review, such as extracting invoice details, requesting missing supporting documents and routing workpapers for review. Teams can use DeskMate's skill library to see available workflow capabilities and explore bookkeeping tasks AI software can automate, while the tax classification and final deduction decision remain with the practice.

For these costs, automation is most useful before judgement is applied: it can reduce manual chasing, copying and task allocation across a large set of transactions. The reviewer still needs to decide whether the circumstances support capital treatment, section 40-880 eligibility and any required apportionment.