A sector expert has confirmed a trustee who is a financial professional and has performed administrative services for their SMSF without charge, including using their tax agent credentials in the process, will not automatically trigger the non-arm’s length expenditure (NALE) provisions.
Accurium head of SMSF education Mark Ellem noted some recent ATO private binding rulings (PBR) have established this fact but recognised the key to reaching such a result will depend on the level of detail contained in an SMSF’s documentation.
“There have been a couple of PBRs where a trustee did some work for their own funds. They used their practitioner software and importantly they lodged the SMSF return using their tax agent number,” he told attendees of the Accurium Compliance Day 2024 held recently.
“If you look at the LCR (Law Companion Ruling 2021/2) when you need licence to do something then [that work is deemed to have been performed in an] individual capacity. That’s not trustee capacity and will put you in the NALE bucket,” he said.
“But, and this is the crucial part, in the documents they provided the ATO for the PBR they documented [two things].
“[Firstly they recorded the fact] they were performing the service in their capacity as a trustee and not as an accountant even though they were using [professional] software. So they were performing the service in their capacity as trustee using all of the skills they had acquired over the time of being an accountant and it’s in the LCR you won’t be penalised for using your own skills.
“With regard to the tax agent number they said they had to use their tax agent number because if they didn’t the software wouldn’t allow them to lodge the SMSF return.”
Ellem revealed as a result of all of these actions the ATO ruled the NALE rules did not apply to the work performed for the fund.
He pointed out receiving a favourable result from the regulator in these situations was dependent on the individual being able to use the software themselves and scenarios where a junior member of staff is required to perform the functions reliant on technology would likely be considered an instance of NALE.
