POWERED BY MOMENTUM MEDIA
Still room for clarification on NALE: Heffron
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:
- Costs that related specifically to an individual asset – in which case all future income in relation to that asset is tainted forever and will be non-arms length income (NALI) (including capital gains); and
- Costs which don’t relate to an individual asset and are therefore deemed to relate to all income of the fund – in which case NALE means all fund income was NALI.
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:
- Work done in the person’s individual capacity – which might create a NALE problem if the fund was not charged arm’s length rates; or
- Work done in their trustee capacity – where it was generally OK not to charge for the work, since being a trustee naturally involves (unpaid) work and sometimes that work will leverage particular skills the trustee happened to have.
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.
AUTHOR
Laura Dew
Laura Dew is editor at Super Review. Prior to joining SR, she spent five years working at Investment Week in the UK covering asset and wealth management.
Recommended for you
The impact of identity theft and its threat to superannuation savings were highlighted in a case that went before the Federal Court at the end of 2023.
A recent NSW Supreme Court decision is an important reminder that while super funds may be subject to restrictive superannuation and tax laws, in essence they are still a trust and subject to equitable and common law claims, says a legal expert.
New research from the University of Adelaide has found SMSFs outperformed APRA funds by more than 4 per cent in 2021–22.
The SMSF Association has made a number of policy recommendations for the superannuation sector in its pre-budget submission to the government.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
Spire Oaktree Opportunities XI Second Close
61.07 3 y p.a(%)
2
Spire Oaktree Opportunities XI First Close USD
59.21 3 y p.a(%)
3
DomaCom Lot 21 Chellaston Road Munno Para West SA 5115 Australia
31.73 3 y p.a(%)
4
Fidante Credit Suisse Global Private Equity
30.15 3 y p.a(%)
5
DomaCom 4/27 Crombie Avenue Bundall QLD 4217 Australia
26.71 3 y p.a(%)
