The Tax Institute has identified non-arm’s-length income (NALI) as a key area needing significant legislative improvement in the superannuation sector in a brief given to the new federal government.
In the report, “Incoming Government Brief: June 2022”, delivered to Treasurer Jim Chalmers earlier this week, the institute encouraged the government to continue its predecessor’s planned changes to the operation of NALI provisions.
“The former government announced that it would amend the law to ensure the NALI provisions operate as envisaged after consultation with relevant industry stakeholders,” The Tax Institute senior advocate Robyn Jacobson said.
“In their current form, the rules are likely to have a significant and unintended impact on the superannuation balances of many Australians.
“We keenly await a public response from the government committing to making the necessary legislative amendments to ensure that the NALI rules do not result in excessive and unintended consequences.”
The superannuation guarantee (SG) regime was additionally identified as a priority due to the disproportionate penalties imposed on accidental or minor mistakes where employers incorrectly pay an employee’s super.
Jacobson noted the approach has failed the need for the law to protect workers’ entitlements and acting as a deterrent for employers failing to meet SG requirements.
“Employers who pay SG contributions just one day late and fail to report this to the ATO are treated the same as an employer who deliberately evades their obligations to their employees,” she said.
Institute tax policy and advocacy general manager Scott Treatt said these superannuation measures were put forward in the briefing as the professional body had to consider the system as a whole.
“This is not to say that other measures are not important; they should remain a priority in the system,” Treatt said.
“The need for genuine and holistic tax reform remains crucial to Australia’s future prosperity and its importance cannot be understated or forgotten.”
