ATO releases administrative approach for 2019- and 2020-income years
On the same day LCR 2019/D3 was issued, the ATO also released PCG 2019/D6 to set out its ‘compliance approach’ to administering its views regarding the treatment of general expenses for the purposes of the NALI provisions.
In particular, in PCG 2019/D6, the ATO states that “trustees of complying superannuation funds may not have realised that the amendments will apply to non-arm's length expenditure of a general nature that has a sufficient nexus to all ordinary and/or statutory income derived by the fund in an income year”. This was a particularly pressing issue, given it was not explicitly addressed by the former LCR 2018/D10.
Given that the non-arm’s length expenditure rules apply from 1 July 2018, if the ATO’s views on the matter are correct, the amendments may result in all income derived by a fund during the 2019- and 2020-income years being classified as NALI where it has incurred non-arm's length expenditure of a general nature.