Recent amendments clarify treatment of SMSFs incurring non-arm’s length expenditure continues
The definition of NALI has been expanded to capture the following arrangements involving non-arm’s length expenditure:
- Other income derived by a complying superannuation fund as a beneficiary of a trust through holding a fixed entitlement to the income of the trust where:
- there is a scheme in which the parties were not dealing with each other at arm's length;
- in acquiring the entitlement or in gaining or producing the income, the fund incurs a loss, outgoing or expenditure of an amount; and
- the amount of the loss, outgoing or expenditure is less than the amount that the fund might have been expected to incur if those parties had been dealing with each other at arm's length in relation to the scheme.
- Other income derived by a complying superannuation fund as a beneficiary of a trust through holding a fixed entitlement to the income of the trust where:
- there is a scheme in which the parties were not dealing with each other at arm's length; and
- in acquiring the entitlement or in gaining or producing the income, the fund does not incur a loss, outgoing or expenditure that the fund might have been expected to incur if those parties had been dealing with each other at arm's length in relation to the scheme.
Note that the expanded definitions of NALI in S.295-550(1)(b), (1)(c), (5)(b) and (5)(c) (as detailed above) can apply to non-arm’s length expenditure whether or not the expenditure is of capital or of a capital nature. Refer to S.295-550(7).