Changes to legislation regarding non-arms length expenditure (NALE) “won’t please many” who are dealing with the payments, according to Heffron.
A key ruling from the Australian Taxation Office (ATO) updated earlier rules on when transactions between a superannuation fund and another party created NALE.
NALE existed when expenses incurred by a self-managed super fund (SMSF) were less than the amount incurred if the parties had dealt with each other on an arms length basis.
According to Meg Heffron, managing director of Heffron, said: “In other words, if a fund’s costs are artificially low, some or all of its income is taxed at the top marginal tax rate of 45% rather than the normal superannuation rates of 15% or nil.
“The ATO has consulted widely and has ended up in a place that won’t please a lot of us on every front.”
The final ruling divided NALE into two buckets:
It also drew a distinction between work done by self-managed superannuation fund (SMSF) trustees and whether they would face a NALE problem in the future, which was dependent on:
Heffron said there still remained several issues to be worked through on the ruling, which included staff discounts and use of company equipment by financial advisers and accountants.
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