Treasury has released proposed legislative changes to the non-arm’s length expenses (NALE) rules. While they are not as bad as the initial proposal to tax NALE at a rate of 225%, they are still not ideal.

Under the proposed changes self managed superannuation funds (SMSFs) and small-APRA super funds (SAFs) will be taxed on general expense NALE on a 2 x multiple (ie an effective tax rate of 90%) on the undercharging/non-charging amounts of NALE. Large APRA superannuation funds will be exempted from the NALE regime (for both general expense and specific expense NALE). SMSFs and SAFs will continue to pay a full 45% tax rate on specific expense NALE, while all superannuation funds will continue to pay full 45% rate on “normal” non-arm’s length income (NALI).

There are many issues with the proposals and, no doubt, industry bodies will continue to push back against these unnecessary and disproportionate measures. For example see some of the following prior industry submissions:

Institute of Financial Professionals Australia submission
Joint bodies submission
Joint bodies press release

To discuss this further or for more information please contact:

Phil Broderick
Principal
Sladen Legal
T +61 3 9611 0163 l M +61 419 512 801
E pbroderick@sladen.com.au