ATO to assess NALI at fund level


No sector-wide directive on how to treat non-arm’s-length income (NALI) issues arising from the COVID-19 relief measures will be delivered by the ATO.

The ATO will not be issuing sector-wide instructions on how to treat non-arm’s-length income (NALI) situations that could arise due to some of the COVID-19 financial relief measures, preferring to deal with each SMSF facing these circumstances individually.

“We don’t plan to issue anything broadly in relation to NALI, but we do welcome anyone that has issues that are arising that are specific to NALI to bring them to us so that we can deal with them through our frequently asked questions page on COVID-19,” ATO SMSF segment assistant commissioner Dana Fleming told SMSF Association chief executive John Maroney during a recorded interview last week.

“I think with NALI the difficulty is the arrangements are often very specific to a particular SMSF so it perhaps doesn’t lend itself to broad comments, but if we do think that the issues raised with us have broad application, then we will publish a frequently asked question.”

Fleming noted the ATO’s COVID-19 page is being updated at least weekly, so any queries asked of the regulator on this subject would be answered quickly.

In addition, she revealed how the regulator would be treating the issue of non-arm’s-length expenditure (NALE), and in particular its treatment as outlined in Law Companion Ruling (LCR) 2019/D3, in response to the coronavirus pandemic.

“We have thought about that [NALE] and I think the difficulty there is the LCR is an ongoing product that will have longevity. The current situation I hope will not have much longevity and we will come out of it, so we won’t be amending that LCR, as it has currently been put out, to deal with COVID-19-related matters,” she said.

“There are matters that have been raised through the consultation period that we are considering and there will be some updates to it, but not for COVID-19.

“So that is still on our list of things to do and I do hope that it will be published in late April or early May. That’s what we’re aiming for.”

Earlier in the week, the regulator announced its approach to extending annual return lodgement deadlines needed due to coronavirus disruption.

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