NALI provisions do not apply to ‘purely internal’ duties performed by fund trustees
For the NALI provisions to apply to a scheme, it is necessary that the parties to the scheme were not dealing with each other at arm’s length. In this regard, the requirement that parties not be dealing with each other at arm’s length means that the NALI provisions do not apply in respect of a superannuation fund’s arrangements that are purely internal. This is because a superannuation fund’s internal functions are not undertaken with another party on any terms, non- arm’s length or otherwise.
The EM to the Bill provides the example of an SMSF trustee that undertakes bookkeeping activities for no charge in performing their trustee duties. Internal arrangements such as these are outside the scope of the NALI provisions as they do not constitute a scheme between parties dealing with one another on a non-arm’s length basis. Note that, as a general rule, an SMSF trustee is prohibited from charging for the services or functions that it undertakes in its capacity as trustee by S.17A(1)(f) of the SIS Act.
On the other hand, a fund trustee may undertake particular activities in performing their duties or choose to outsource those functions to third parties (e.g., if the fund had a real estate portfolio, the trustee may manage the properties or contract the services of a real estate agent). The NALI provisions can potentially apply in respect of services or functions that are undertaken by the trustee in their capacity as an individual (i.e., rather than in their capacity as trustee of a fund).