EXAMPLE – Failure to charge for accounting fees causes all of fund’s income to be NALI
For the 2021 income year, Sue, as trustee of her SMSF, engages an accounting firm (where she is a partner) to provide accounting services for the fund. The accounting firm does not charge the fund for the accounting services.
For the purposes of S.295-550(1), the scheme involves the SMSF acquiring the accounting services under a non-arm's length arrangement. In the ATO’s view, the non-arm's length expenditure (being the nil amount incurred for the accounting services) has a sufficient nexus with all of the ordinary and statutory income derived by the SMSF for the 2021 income year. As such, in these circumstances, the ATO would consider all of the SMSF's income for the 2021 income year to be NALI.
Note that, at the time of writing, LCR 2019/D3 had not yet been finalised. The ATO received a number of submissions on the draft ruling, including a submission from the NTAA, with much of the feedback focused on the ATO’s approach taken with regard to general expenses.