ATO ruling may offer solution to NALE issues
Amendments being made to contribution ruling TR 2010/1 may provide a fix to some of the significant issues with the non-arm’s length expenditure rules, said the SMSF Association.
Addressing the 2022 SMSF Association National Conference, SMSF Association deputy chief executive Peter Burgess said the changes to the non-arm’s length expenditure (NALE) rules would have much broader implications for the entire superannuation sector than was originally intended.
“In some circumstances, could result in all of the fund’s income being taxed at 45 per cent,” said Mr Burgess.
“Prior to the introduction of the NALE rules, we were certainly not coming across SMSF members who were undercharging for services provided to their fund as a deliberate strategy to circumvent the contribution caps or to artificially inflate the fund’s investment earnings.”
Mr Burgess said it is imperative that these rules are appropriately targeted and are fit for purpose.
“In our view, amendments are needed to exempt general expenses from these provisions, and ensure penalties only apply to expenditure shortfall amounts rather than to some or all of the fund’s income,” he explained.
Mr Burgess said it is the linking of the NALE to some or all of the fund’s income, and then applying penalties to that income, that could give rise to inappropriate and poorly targeted outcomes.
“Breaking this link and only penalising the shortfall amount is, in our view, an appropriately targeted legislative response,” he said.
“The penalty could be treating the shortfall amount as a taxable contribution or dealing with it through the contributions regime.
“So, the solution may well lie in the amendments the ATO are currently making to contribution ruling TR 2010/1, which is now expected to be released in the second half of 2022.”
Mr Burgess noted that the government had announced plans to amend the NALE rules to ensure they are operated as intended, an announcement that has been welcomed by the SMSF Association.
“We were pleased to see this announcement and we look forward to a bipartisan approach to addressing this issue and ensuring the rules work as intended”, he said.
Miranda Brownlee
26 April 2022
smsfadviser.com
Latest Newsletters
Hot Issues
- Aged care report goes to the heart of Australia’s tax debate
- Removed super no longer protected from creditors: court
- ATO investigating 16.5k SMSFs over valuation compliance
- The 2025 Financial Year Tax & Super Changes You Need to Know!
- Investment and economic outlook, March 2024
- The compounding benefits from reinvesting dividends
- Three things to consider when switching your super
- Oldest Buildings in the World.
- Illegal access nets $637 million
- Trustee decisions are at their own discretion: expert
- Regular reviews and safekeeping of documents vital: expert
- Latest stats back up research into SMSF longevity and returns: educator
- Investment and economic outlook, February 2024
- Planning financially for a career break
- Could your SMSF do with more diversification?
- Countries producing the most solar power by gigawatt hours
- Labor tweaks stage 3 tax cuts to make room for ‘middle Australia’
- Quarterly reporting regime means communication now paramount: expert
- Plan now to take advantage of 5-year carry forward rule: expert
- Why investors are firmly focused on interest rates
- Super literacy low for cash-strapped
- Four timeless principles for investing success
- Investment and economic outlook, January 2024
- Wheat Production by Country
- Time to start planning for stage 3 tax cuts: technical manager
- Millions of Australians lose by leaving savings in default MySuper funds
- Vanguard economic and market outlook for 2024: A return to sound money
- An investment year of ups and downs
- How to tame the market's skewness
- The Countries that Export the Most Wine in the World
- Tips for preparing for the best tax outcomes
Article archive
- October - December 2023
- July - September 2023
- April - June 2023
- January - March 2023
- October - December 2022
- July - September 2022
- April - June 2022
- January - March 2022
- October - December 2021
- July - September 2021
- April - June 2021
- January - March 2021
- October - December 2020
- July - September 2020
- April - June 2020
- January - March 2020
- October - December 2019
- July - September 2019
- April - June 2019
- January - March 2019
- October - December 2018
- July - September 2018
- April - June 2018
- January - March 2018
- October - December 2017
- July - September 2017
- April - June 2017
- January - March 2017
- October - December 2016
- July - September 2016
- April - June 2016
- January - March 2016
- October - December 2015
- July - September 2015
- April - June 2015