Industry marshals NALE arguments

NALE super funds

A group of industry associations will collectively present case studies highlighting the impact of NALE provisions on super funds as part of a push to make changes.

A collective of industry associations will present a range of case studies to the government and the ATO detailing the impact of non-arm’s-length expenditure (NALE) provisions on super funds in an effort to enact changes, according to one of the bodies involved.

Chartered Accountants Australia and New Zealand (CAANZ) superannuation leader Tony Negline said the group of industry associations, which he did not name, had drawn up 15 case studies relating to the impact of NALE on either SMSFs, Australian Prudential Regulation Authority (APRA)-regulated funds or both.

Speaking during the CAANZ SMSF Conference2021 today, Negline said following the release of the ATO’s finalised Law Companion Ruling (LCR) 2021/2, outlining its position on NALE, 12 industry associations had written to Superannuation, Financial Services and the Digital Economy Minister Jane Hume asking the government to amend the law underlying the provisions.

“In all my working life this is the only time I can remember that all industry and professional associations have collectively agreed on a particular issue and have expressed their views as one voice to government and the ATO, and it is a significant event in relation to this issue,” he said.

“We will wait to see what the government says about this particular matter, but in the meantime the associations have collated a range of case studies and situations for APRA-regulated funds and SMSFs, which we are about to present to the ATO.”

He said some of the issues related to the offsetting of capital gains and losses between arm’s-length income and expenditure and non-arm’s-length income (NALI) and NALE, ensuring limited recourse borrowing arrangements were retained with a safe harbour from a NALE perspective and the application of fee discounts for SMSF advisers, accountants, auditors and trustees who carry out work for their own fund.

The associations had also met with Treasury and would continue to discuss the issues with it, as well as the ATO, in the event there was no legislative change and further information on the application of the provisions was required from the latter, he added.

“The industry associations may suggest to the government some amendments to the legislation itself and the government can consider those with the Office of Parliamentary Counsel, which is responsible for writing laws,” he said.

He also noted recent comments from Hume regarding the government’s awareness of the impact of NALE.

Earlier this year, CAANZ, in conjunction with the Institute of Public Accountants and the Tax Institute, called for revisions to the NALE provisions, as did the SMSF Association, after the ATO released its finalised LCR on the issue.

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