Addressing the 2022 SMSF Association National Conference, SMSF Association deputy chief executive Peter Burgess said the changes to the non-arm’s length expenditure (NALE) rules would have much broader implications for the entire superannuation sector than was originally intended.
“In some circumstances, could result in all of the fund’s income being taxed at 45 per cent,” said Mr Burgess.
“Prior to the introduction of the NALE rules, we were certainly not coming across SMSF members who were undercharging for services provided to their fund as a deliberate strategy to circumvent the contribution caps or to artificially inflate the fund’s investment earnings.”
Mr Burgess said it is imperative that these rules are appropriately targeted and are fit for purpose.
“In our view, amendments are needed to exempt general expenses from these provisions, and ensure penalties only apply to expenditure shortfall amounts rather than to some or all of the fund’s income,” he explained.
Mr Burgess said it is the linking of the NALE to some or all of the fund’s income, and then applying penalties to that income, that could give rise to inappropriate and poorly targeted outcomes.
“Breaking this link and only penalising the shortfall amount is, in our view, an appropriately targeted legislative response,” he said.
“The penalty could be treating the shortfall amount as a taxable contribution or dealing with it through the contributions regime.
“So, the solution may well lie in the amendments the ATO are currently making to contribution ruling TR 2010/1, which is now expected to be released in the second half of 2022.”
Mr Burgess noted that the government had announced plans to amend the NALE rules to ensure they are operated as intended, an announcement that has been welcomed by the SMSF Association.
“We were pleased to see this announcement and we look forward to a bipartisan approach to addressing this issue and ensuring the rules work as intended”, he said.
Miranda Brownlee
26 April 2022
smsfadviser.com
Director
BEc (Acc), MBA, CPA, FFin
David has been in the Financial Services Industry for nearly 30 years. He was one of the founding Directors of the successful Financial Planning and Stockbroking Practice, Henderson Gregory Forrest, for a decade. Prior to that, he held senior roles in companies such as ING, KPMG Accountants and AMP. David was previously Chairman of OAMPS Superannuation Trustee Board and currently serves as an independent Board Director for several companies.
David’s extensive experience in all forms of superannuation, including Self Managed Super Funds (SMSF), Defined Benefit Funds, retirement funding through Account Based Pensions, stockbroking with a focus on Direct Share Investment, Taxation/Remuneration Planning, Centrelink, Aged Care and business management, equip him to advise expertly on all aspects of Financial Advice.
Those with a particular interest in superannuation/SMSFs, direct share investment, salary packaging or applying for the Centrelink Pension will find his knowledge and ability in formulating and implementing creative, logical and simple wealth creation strategies a valuable asset.
David maintains a strong personalised client service focus, providing tailored solutions for clients.
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David Forrest is an Authorised Representative of Integrity Financial (SA) Pty Ltd ABN 16 133 921 187 — AFSL No 334846
Business Finance Manager
B Bus (Acc), CPA
Michelle’s career has spanned across the Financial Services, Retirement Living and Aged Care industries working in the private sector, not for profit and more recently with the state government for over 20 years. Her experience extends to many facets of the financial services industry, having worked in superannuation administration, technical support and financial planning practice administration.
Commencing with AMP and subsequently working in commerce and accounting roles with companies such as Brambles, Adelaide Bank Retirement Services, ECH Inc and SA Health and Wellbeing, Michelle returns to financial services after working in practice financial management at Henderson Gregory Forrest. This wide range of experience from senior accounting and management roles has provided Michelle with a strong background in business administration.
With an astute financial acumen and keen interest in business improvement strategies, Michelle ensures the smooth running of the Integrity Financial Advisory practice providing valued management support to our personalised client service focus.
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Client Service Manager
Jasmine has worked in the financial services industry for over 12 years in all areas of client administration, working with David since 2013.
Jasmine has extensive knowledge and experience in client service including implementation of advice, portfolio reporting, assisting with the establishment of Self Managed Super Funds (SMSFs), term deposit management and a long history of helping clients with their enquiries.
Jasmine’s attention to detail, yet gentle approach, means she is able to solve the trickiest of questions for our client community.
Jasmine has gained her Certificate III in Financial Services qualification.
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Senior Client Service Manager
Merrilyn has worked in the financial services industry for over 11 years in all areas of client administration, and is a new addition to our client services team, returning from Melbourne to join the team in June 2019.
Merrilyn has extensive knowledge and experience in client service including implementation of advice, managed fund administration, assisting with the establishment of Self Managed Super Funds (SMSFs) and process improvement for the previous practices she has worked with. Merrilyn’s experience with direct shares constitutes the other part of our administrative support for direct equity investments.
Merrilyn’s warm and caring nature continues to endear her to our clients and she has already established herself as a valued member of our team.
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