Expenses relating to an SMSF as beneficiary of a trust
When a superannuation fund holds a fixed entitlement to the income of a trust and derives income as a beneficiary of that trust (e.g., it is presently entitled to a distribution from a fixed unit trust), non-arm’s length expenditure (or nil expenditure) incurred in acquiring the entitlement or in gaining or producing the income results in the income forming part of the fund’s non-arm’s length component (and is taxed at the highest marginal rate accordingly). Refer to S.295-550(5)(b) and (c). Examples of such expenditure may include:
- a complying superannuation fund incurring non-arm's length expenditure in acquiring the interest in the trust (e.g., in acquiring units in a unit trust); or
- the fund entering into an LRBA on non-arm's length terms in order to obtain funds to acquire the fixed entitlement.
This amendment ensures the NALI provisions apply consistently between the general NALI rules (for the income derived directly by a superannuation fund) and where a superannuation fund derives income through its fixed entitlement to the income of a trust.