If the SMSF pays an anti-detriment payment, the trustee can claim an income tax deduction.
To ensure this claim is made correctly, trustees must claim the deduction in the financial year in which the lump sum (not instalments) is paid.
This deduction can be used to reduce the tax payable by the fund in the year of the payment. Alternatively, if a tax loss is generated, it can be carried forward to future years. Trustees of SMSFs should consider whether the fund is expected to generate sufficient taxable income to use this deduction.
Trustees also need to consider if there are sufficient funds in the SMSF to pay the extra anti-detriment amount. Some SMSFs set aside earnings in a reserve over a number of years or rely on the proceeds of an insurance policy to fund these payments. If an SMSF is using a reserve to source the extra payment, it is important to note that an allocation from the reserve could be a concessional contribution and count against the deceased member's concessional contribution cap, for excess contribution tax purposes.
The FA is partly correct. Your fund will need to have the cash available to pay the ADP (over and above what is held for members) and also be able to recoup this from the ATO over time as a tax deduction (not as a refund, as some people believe).
In all cases you need to ask why do I (really) want a SMSF and are those options already available in a public offer / wholesale option already?
