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SMSFs warned against relying on potential NALI changes

craig day new smsf
Miranda Brownlee
14 January 2022 — 2 minute read

While the government has announced it will review the controversial non-arm’s length income rules, SMSF professionals have been warned against relying on any potential changes that might happen. 

Speaking in a recent podcast, Colonial First State head of technical services Craig Day said while the government has announced that they will be reviewing the non-arm’s length income rules, this doesn’t mean SMSF professionals and their clients should ignore the current laws and ATO ruling on NALI as they stand.

After the ATO released its final ruling explaining how the amendments to the NALI rules would operate in relation to non-arm’s length expenses of a general nature, Mr Day said industry associations and professional bodies from across the whole superannuation industry united to lobby the government for a fix to the raft of issues stemming from the current set of rules.


“The government has now turned around and said yes, we will review these rules. [We don’t know if] that means reviewing the law or reviewing the ruling,” said Mr Day in a CFS FirstTech podcast.

“Governments don’t review rulings, so they may actually go back and review the law, and they may say you know what, no need for any changes and so therefore this ruling stands. Or if they are convinced that there is a problem here, they might go and review the law in some small fashion to address those issues, and that would then mean that the ruling then needs to be clarified.”

In October last year, Senator Jane Hume said the government had “very much heard” the industry’s concerns about the need to fix the NALI rules, which potentially expose the entirety of a super fund’s income to a punitive tax rate due to a nominal or insignificant discount on a dealing.  

“We know the concerns about the commissioner’s ruling, and I can assure you … [that] we are looking into your question,” Ms Hume said at the Tax Institute’s National Super Conference.

SMSF Association deputy chief executive Peter Burgess stated last month that a group of associations, including the SMSF Association, are in ongoing discussions with Treasury as well as the ATO to try and make some changes to the rules to prevent situations where just a very small expense that hasn’t been incurred on arm’s length terms results in all the income in the fund being taxed at 45 per cent plus the contributions being taxed at 45 per cent.

Mr Day cautioned that while the government may be in the process of reviewing these rules, SMSF professionals and trustees should ensure they are following the NALI rules that are currently in place rather than waiting for a potential change in the law.

“I would be taking the approach currently that this ruling applies, and I would be complying with it to the extent that I’m capable of. I would not be relying on the fact that they’re going to change,” warned Mr Day. 

Miranda Brownlee

Miranda Brownlee


Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.

Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years. 

Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.

You can email Miranda on: This email address is being protected from spambots. You need JavaScript enabled to view it.

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