The length of time it has taken to resolve the concerns of the superannuation sector around non-arm’s-length expenditure (NALE) is unreasonable and raises questions as to what the aims of the ATO are, an SMSF legal expert has said.
DBA Lawyers director Dan Butler said the recent announcement by the federal government that it would make legislative changes to ensure non-arm’s-length income (NALI) and NALE provisions operated as first conceived was taking place well after work first began to address unresolved issues with the ATO.
“The government has taken notice of the industry stakeholders regarding the interpretation of those provisions by the ATO – that is an ATO construction or maybe over-reach – and [Superannuation, Financial Services and the Digital Economy Minister] Senator [Jane] Hume says they have heard the concerns of the industry and will work to amend the law to make sure it operates as intended,” Butler said at the Self-managed Independent Superannuation Funds Association Annual SMSF Forum today.
“We are almost four years down the track from the initial consultative draft legislation and a lot of work and hundreds of hours people and professional bodies are putting into these things just to get some reasonableness of the law.
“For a fund to get 45 per cent of all of its income forever tainted – what a claim. That is really not the way the law should operate and it shouldn’t be so difficult to get those changes to the law.”
He said the ATO’s view that a general expense had a nexus to all income of a superannuation fund was over the top and should not have been an issue identified by the industry.
“That was the view and it was really an absurd view and we [via The Tax Institute submission] picked the ATO up on this, which corrected its draft ruling and changed its view that if it was an expense on acquisition it was forever tainted, but if it was an expense post-acquisition, it would only taint particular financial years,” he said.
“It was only from really deep thinking and turning it around and debating it internally that The Tax Institute could put these points back to the ATO for them to take on board.
“Without that work the average SMSF would have been tainted forever on the ATO’s view and it wasn’t until the submission was picked up that we even got some come back on that proposition.
“What a way to run the revenue. What a way to operate the legal system. When I went to law school, the ATO were the administrators, they were not the lawmakers; it was Treasury who were the lawmakers.”