Overview
This validation error appears when a fund's audit fee fields have not been completed. This article explains what causes the error and how to clear it so the SMSF annual return can be lodged.
Understanding the Audit Fee Fields
There are two separate fields for recording the SMSF audit fee, and they map directly to the corresponding labels on the SMSF annual return:
| Field | Label | Used when |
|---|---|---|
| H1 | Deductible audit fee | The fund has taxable income and can claim a deduction for the fee |
| H2 | Non-deductible audit fee | The fund is in 100% pension phase and has no taxable income |
Only one field should contain the fee amount. The other should be left at 0 or blank.
Important
Do not enter the same fee amount in both H1 and H2. This will double-count the expense and affect the fund's financial position.
Which Field to Complete
Accumulation phase or mixed-phase funds
The audit fee is generally tax-deductible. The fee amount will be entered in H1 if the fund pension policy has not been set at 100%.
100% pension phase funds
The fund has no taxable income, so the audit fee cannot be claimed as a deduction. Enter 0 in H1 and enter the actual fee amount in H2.
Instructions
| From the Main Toolbar, navigate to Compliance | |
| Select Tax Compliance |
Select Section C - Expenses.
Locate the H1 and H2 labels, and enter 0 in the H1 label.
Click Save.
Select Validate to confirm the validation error has cleared.
What Entering 0 in H1 Does
Entering 0 in H1 for a pension-phase fund:
- Clears the validation error
- Allows lodgement to proceed
- Correctly reflects that no deduction is being claimed
- Does not create a deduction or affect taxable income
- Does not alter the fund's financial statements
- Does not affect the lodgement data sent to the ATO
The 0 value is a placeholder that satisfies the software's validation requirement. It has no financial or tax consequence.