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Accounting, Regulation

Industry overstating NALI impact

non-arm’s-length income statistics

The SMSF sector is placing more importance on the non-arm’s-length income rules than is warranted by ATO statistics, according to an accounting body.

The significance of the non-arm’s-length income (NALI) rules affecting SMSFs has been exaggerated, with statistics indicating the impact of the legislation is minimal, an industry consultant has said.

“As an industry we bang on about that subject as if there was nothing else in the world to talk about. It is always coming up as a topic of conversation,” Chartered Accountants Australia and New Zealand superannuation and retirement incomes principal consultant Tony Negline said at the professional body’s recent SMSF Day 2019 in Sydney.

“How many funds in the tax stats that were released a month or two ago, or maybe a little bit longer, for the 2016/17 year declared non-arm’s-length income?

“Ninety-seven. Ninety-seven big fat funds declared $16.5 million of income that was non-arm’s length.”

Negline said this statistic had to be analysed in the context of the same data acknowledging the existence of around 600,000 SMSFs across the nation.

“So here we are talking ad infinitum about a subject that almost no one needs to worry about,” he said.

He conceded the likelihood of the legislation being passed to capture non-arm’s-length expenses in addition to NALI could increase the number of SMSFs affected by the entire set of rules.

“But really we’re talking about a subject that is of somewhat academic interest alone and hopefully we can ignore that subject maybe more than what we have,” he said.

The ATO recently indicated SMSFs should not make any changes to their NALI reporting in their annual returns, despite new legislation being introduced into parliament last week that will affect the reporting process.

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