Following Tuesday night’s Budget, AMP SMSF’s Peter Burgess has highlighted a new tax consideration which creates “extra incentive” for not triggering the non-arm’s length income rules.
As part of the 2014/2015 federal Budget, the government announced its plans to impose a temporary Budget Repair Levy of two per cent on that part of a person's taxable income which exceeds $180,000.
Speaking to SMSF Adviser, Mr Burgess explained the Budget Repair Levy will apply to non-arm’s length income.
“The tax that applies to non-arm’s length income is 45 per cent. But that’s being increased by two per cent as a result of this levy, so that will go to 47 per cent,” he said.
“That’s not tied to your personal income… that’s just automatically applied if the fund has non-arm’s length income,” he added.
“[Trustees should] ensure that the amount of income that the fund’s assets are deriving is consistent with an arm’s length arrangement, and that’s particularly important when they’re dealing with related parties.”
Speaking more broadly, Mr Burgess said AMP SMSF was “reasonably pleased” with the Budget, in particular the way in which excess non-concessional contributions will be treated.
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