A collective of 13 professional and industry bodies are presenting a joint voice in continuing discussions with the ATO and Treasury to find a workable solution to the non-arm’s-length expenditure (NALE) rules and associated penalties considered too severe.
The organisations working together to achieve a better NALE outcome are Chartered Accountants Australia and New Zealand, CPA Australia, the Institute of Public Accountants, The Tax Institute, the SMSF Association, the National Tax and Accountants Association, the Association of Superannuation Funds of Australia, the Australian Institute of Superannuation Trustees, the Actuaries Institute, the Self-Managed Independent Superannuation Funds Association, the Financial Planning Association of Australia, Tax & Super Australia and the Financial Services Council.
According to the SMSF Association, the bodies recognise the urgency regarding the issue given the ATO’s current policy of not allocating enforcement resources to policing the rules around expenditure of a general nature defined in Practical Compliance Guide (PCG) 2020/5 is set to end on 30 June 2022.
The association has confirmed the ATO is now considering an extension to its pragmatic enforcement approach as it has acknowledged the need to provide certainty to all superannuation funds regarding this matter.
While looking toward finding a solution to the ATO’s compliance approach in the immediate term, the industry bodies are keeping the longer-term objective to formulate more sensible NALE rules in mind.
“We will also continue to liaise with Treasury about a longer-term necessary legislative amendment to these provisions. We look forward to working with the government and Treasury about the legislative amendment,” the SMSF Association said.
Earlier this year, ATO SMSF risk and strategy assistant commissioner Justin Micale revealed what the regulator’s approach to the enforcement of the NALE rules would be commencing 1 July 2022 in light of the then coalition government’s commitment to review the provisions.
“I must acknowledge the very recent government announcement regarding [its] intention to consult with industry stakeholders about the operation of the NALE provisions. I want to confirm that despite this announcement the ATO must continue to administer the law as it currently stands,” Micale said at the Tax Institute Superannuation Intensive event.
