The example concerns Mina who is a trustee of her SMSF of which she is the sole member. She is a chartered accountant and she operates Once Accounting Services as a sole trader.

Whilst at the office, Mina receives a phone call on her office phone from her SMSF auditor during her business hours. The call is related to supporting documentation for an investment made by her SMSF required by the SMSF auditor to complete the audit process. After the phone call, Mina sends a follow-up email to the SMSF auditor using her business computer providing the relevant supporting documentation.

Mina performs these activities as trustee of her SMSF and does not charge her SMSF. Although Mina undertakes the activities at her business premises where she operates her accounting business, the use of the business supplied computer and the office telephone is minor and incidental in nature, and would not, of itself, indicate that Mina is acting in any capacity other than as trustee for her SMSF. Accordingly, the non-arm's length expenditure provisions will not apply.

“This example really speaks to accountants. Previously some people may have had the ‘spook’ put up them about the ability to carry out duties and whether, if they do work for their own fund for free, whether it's going to cause non-arm’s length income,” Figot said.

“That is certainly something which is on the radar. However, the ATO does give some clarity, with this new example. On the face of it, it may have caused some early concern but the tax office has now clarified that although Mina undertakes activities at her business premises where she operates her accounting business, the use of the business supplied computer and the office telephone, it’s not a concern as it is only ‘minor and incidental in nature’, and it would not, of itself, indicate that she's acting in any capacity other than as trustee.”

“This example should give a bit more confidence to accountants and perhaps financial advisers.”

Figot said updates to Tax Ruling 2010/1 on superannuation contributions which were released late last week have also clarified the issue of contributions by way of value shifting.

“The update does clarify that if you make a contribution by way of value shifting to an asset owned by the super fund, if parties are dealing on an arm's length basis it is fine,” he said.

“The superannuation provider just records the market value as an increase in capital as a contribution, and you don't have a non-arm’s length income issue. However, if a contribution is made by value shifting and you're not dealing at arm's length, then you might have both a contribution and a NALI issue.”

He continued that in the contribution ruling 171B, where a contribution is made by value shifting to an asset owned by the superannuation provider, and the parties to the arrangement are not dealing on an arm's-length basis, NALI provisions may also apply.

“So, it could be a real double whammy. if you do have anything a little bit funky, such as SMSF that is invested in some private equity, and you have dealings in respect to that private equity, you've got to make sure that your dealings are consistent with an arm's-length dealing and it's incumbent upon you to prove it.”