Trustees can provide services free of charge to their own fund but must be aware of which capacity they are acting in when they do so, according to an SMSF legal expert, who claims a new ruling has clarified these conditions.
DBA Lawyers special counsel Bryce Figot said trustees had been given a clearer idea of where they stand in relation to non-arm’s length income (NALI) and expenses under new draft ruling from the ATO which has clarified when they can provide services free of charge.
Speaking as part of a recent webinar, Figot pointed to Law Companion Ruling (LCR) 2019/D3 from the ATO as providing more information to trustees than was available in the Explanatory Memorandum to the Treasury Laws Amendment (2018 Superannuation Measures No 1) Bill 2019 which introduced the changes to the NALI rules.
Pointing to the LCR, and using an example of a trustee acting in that capacity, Figot said they could perform bookkeeping or accounting services for the fund for no remuneration.
“In a nutshell, we can still do, for example, accounting for free if the work is done in a director or trustee capacity,” Figot said, adding the same would apply if a real estate agent sold a property in their trustee capacity.
He also pointed a person would not be acting in their capacity as a trustee, but as a separate individual if they used the equipment and assets of their business, or those used in their profession or employment, as well as under the licence or qualification, or under the insurance policy related to their business, profession or employments.
“If I do a deed update for my SMSF and it’s done at work and covered by the work professional indemnity policy, it could put a hole in the fund,” Figot said.
He added a range of SMSF trustees, including those who were not real estate agents but had direct rental arrangements, employees of real estate agents and financial planners could continue to provide services to their fund for free but in each case they were unable to use equipment, assets, licensing or insurance related to their business, profession or employment.
“We have far more guidance now than we have had previously. This is new, it is only in draft format but I don’t expect it to change and it is very important,” Figot said.