NALI implications in ASIC factsheet

ASIC factsheet NALI

A recent factsheet from ASIC on the running costs of SMSFs has drawn industry criticism.

A specialist lawyer has suggested the Australian Securities and Investments Commission’s (ASIC) estimation of the amount of time trustees spend managing their SMSFs, provided in a recent factsheet, provides a different and more concerning dimension to the new non-arm’s-length income (NALI) rules relating to fund expenses.

At an SMSF strategy seminar in Sydney last week, DBA Lawyers senior associate William Fettes said the questionable assessment was part of a factsheet released by ASIC in October that outlined the running costs of SMSFs for trustees.

In particular, Fettes focused on a factsheet item stating SMSF trustees spent 8.4 hours a month on average managing an SMSF, which was the equivalent of 100 hours a year.

He said the number of hours ASIC acknowledged could be interpreted as lending weight to the argument trustees may not be charging the fund enough for the administrative services they perform, in turn bringing the new non-arm’s-length expense rules into play for a large number of SMSFs.

“[When I saw this, I thought] NALI. All that time. Look what they’re doing. Was it trustee duties?” he said.

“Are [they] saying that all these hours mean that all of the statutory and ordinary income are NALI?”

In addition, he noted the factsheet had raised some points that had been widely disagreed with within the SMSF sector, including the $13,900 a year ASIC claimed was the average cost of running an SMSF.

“The factsheet had some sensible, normal things to say about how onerous an SMSF is. It’s not for everyone and that’s fine. I don’t think many people would object to many of the things they said in that factsheet,” he said.

“But there were some claims about returns on average and the average running cost, which I think were pretty contentious and not very well received.”

He cited critical responses to the factsheet from the SMSF Association and SMSF software provider BGL Corporate Solutions as examples of the negative attention ASIC’s figure for the average cost had received within the industry.

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