In the latest SMSF Adviser podcast, Aaron Dunn, CEO of Smarter SMSF, said although the NALI and NALE measures were ultimately finalised on 1 July, the ATO’s guidance around these needed to be updated.
“The [new measures] were the two times multiple approach that creates non-arm’s length income in superannuation, but now we also have the updated guidance which was released on 28 November,” he said.
Dunn said the guidance LCR2021/2, in essence, is a draft for comment and will be open until around 26 January 2025.
“The consolidated draft is LCR2021/2DC and updates the ruling to encapsulate the law in respect to the general expenses, as well as making a number of updates around the non-arm’s length expenditure requirements as they relate to specific expenses.”
“We have amendments in that LCR, but equally, we also have amendments in the tax ruling around superannuation contributions, and again the connection of non-arm’s length expenditure in relation to the contribution rules.”
He added that TR2010/1DC2 is available for public consultation and will also be finalised in January.
This is a draft consolidation outlining proposed changes to TR2010/1 Income tax: superannuation contributions to explain the interactions between the non-arm’s length income provisions and the rules concerning superannuation contributions. It also contains changes to reflect the removal of the maximum earnings test to deduct personal contributions, which commenced from 1 July 2017.
“Ultimately, the areas that the ruling is updated are around value shifting and where there are non-commercial arrangements, and also around in-species contributions where the allowable transfer, business real property, listed shares are done under a sales contract,” Dunn said.
“It also includes in-species contribution, so part purchase, part in-species and makes it clear around the steps that would be required to ensure that the non-arm’s length expenditure rules don’t apply to a non-commercial arrangement that would invoke the non-arm’s length income.”
Dunn said the industry has been waiting for the updates since July and with the flurry of guillotine motions during the last sitting week of Parliament, their release was overshadowed.
“Now we are getting more clarity out of these older rulings,” he said.
“We’ve already seen this year an update around the tax ruling on pensions and now we’ve seen an updated ruling on contributions. We’ve also now seen the updated guidance around the non-arm’s length expenditure requirements.”
