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SuperConcepts has proposed a carve-out to the ATO’s draft ruling around new non-arm’s length expense (NALE) laws which would allow low-value activities with a minimal relationship to the income produced within an SMSF to be excluded from the rules.
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SuperConcepts floats carve-out for NALE laws
17 December 2019
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In an upcoming Accountants Daily Insider podcast, SuperConcepts executive manager of SMSF technical and private wealth Graeme Colley said the SMSF service provider had been involved in the ATO’s recent consultation around its interpretation of the NALE rules, which had caused concern in the SMSF community.
“The main controversial part of it is the professional services a person might provide for their own SMSF and whether that comes out of their own resources or out of the resources of a business they might have,” Mr Colley said.
“The difficulty there is trying to quantify what the amount [for those services] would be or whether it does create a NALI problem for that fund.”
With the ATO having confirmed it was seeking suggestions from the industry around a practical way to implement the general expense provisions, Mr Colley said one proposal could be to exclude activities that had little effect on the income generated in the fund, such as using a business phone line in the course of preparing an annual return.
“What I think we would like to see come out of [the consultation] is working out what activities or what value may be excluded from the NALI aspect,” he said.
“For example, if I use the phone in my business in relation to my SMSF, does just that one event taint it so much that I end up paying 45 per cent tax on the investment income of my super just because I’ve used something free in relation to that service that I might provide for that fund?
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“I think maybe some common sense that comes out of it would certainly be what we’re after, and hopefully, we can see some threshold there, some activities that might be excluded in those circumstances.”
Mr Colley said the changes to NALI rules were one of the top client queries received by SuperConcepts this year, along with the ATO’s diversification campaign and ongoing confusion around the proper structuring of death benefits.
“For some people, the NALI thing is certainly interesting simply because of the types of investments they’ve got in their super fund, mainly from the income point of view and the high income they were getting on particular investments rather than the expenses relating to that,” he said.
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