NALI concerns allayed for practitioners who DIY super

 

The same piece of legislation that introduced a 12-month SG amnesty also clears up one small area of concern for accountants and other practitioners who are also members/trustees of their own SMSF.

The legislation, Treasury Laws Amendment (2018 Superannuation Measures No 1) Bill 2018 (read it here) covers the amnesty but also deals with employees with multiple employers, LRBAs, and the non-arm’s length income (NALI) provisions. These aim to quash situations where parties enter into transactions that are not run on commercial terms (and so gain an advantage).

An ongoing niggling concern with accountants who run their own superannuation fund has been that they run the risk of not complying with the requirement under s109 of the Superannuation Industry (Supervision) Act 1993 that states investments by an SMSF trustee broadly must be made and maintained on an arm’s length basis.

The new legislation (or rather, the EM) has now clarified that the NALI rules do not apply when one is dealing with one’s own super fund. Paragraph 3.33 (page 37 of the EM) states: “The requirement that parties not be dealing with each other at arm’s length means that the non-arm’s length income rules do not apply in respect of a superannuation entity’s arrangements that are purely internal. This is because an entity’s internal functions are not undertaken with another party on any terms, non-arm’s length or otherwise.”

The EM even covers the situation where an accountant may provide bookkeeping services for their fund for no charge to the SMSF entity. “For example, an SMSF trustee may undertake book keeping activities for no charge in performing their trustee duties. Such internal arrangements are outside of the scope of the non-arm’s length income rules as they do not constitute a scheme between parties dealing with one another on a non-arm’s length basis.”

Webinar with more updates for SMSFs

Also recently updated by the ATO has been the use of the transfer balance account report (TBAR, read more about this here). An upcoming webinar (details below) is to cover the ins and outs of the TBAR, but will also:

  • reveal the new details provided by the Treasury with respect to the triennial SMSF audit policy announced in this year’s federal budget
  • clarify whether a fund can apply the transitional CGT relief where a reversionary pension reverts to the nominated beneficiary in the 2016-17 year
  • cover the death benefit rollover issues arising when the death benefit includes life insurance proceeds and the fund had claimed deductions for insurance premium payments
  • discuss year-end strategies to take advantage of the significant super changes that are now legislated, such as the concessional personal superannuation contribution opportunities pre-30 June in light of the removal of the 10% rule
  • the recent amendment to the initial proposal to count outstanding limited recourse borrowing arrangement (LRBA) loan balances against an SMSF member’s total super balance, and
  • the current ATO interpretation of the debit value when commuting a market linked pension.

Note that Gabriela Rusu’s upcoming Superannuation Quarterly Update webinar, to be held on June 21, will be looking specifically at the intricacies of the above issues, as well as many other essential matters that SMSF trustees need to know. Places are limited, so book in now.

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