ATO targets non-arm's length income - NALI
Following a series of ATO audits conducted on SMSFs in recent months, the ATO has been applying non-arm’s length income to a number of SMSFs resulting in serious tax consequences for these funds, warns an industry consultant.
Speaking to SMSF Adviser, super consultant and non-executive director of SuperConcepts, Stuart Forsyth said while the ATO has been conducting a big project on non-arm’s length income for a few years now, in the past six months it has resolved a number of cases and collected significant amounts of money.
Mr Forsyth said he has seen numerous situations recently where the SMSF trustee has advantaged their fund some years ago with a transaction and the commissioner has now issued a position paper to them suggesting that it raise non-arm’s length income against the fund.
The ATO tends to provide a position paper in the latter stages of an audit to explain their position and give the trustee a chance to respond before it finalises the audit.
“In the ones that I’ve seen the trustee has undertaken the transactions but they haven't really gone and got a ruling from the commissioner at the time and they haven't gotten a contemporaneous valuation,” he explained.
“It's difficult to prove after the event, especially when the investment has gone very well, that the fund wasn't advantaged if you hadn’t documented it well at the time.”
A lot of the funds affected have generally been in pension phase so they’ve gone from paying zero tax to 47 or 45 per cent in more recent years, he cautioned.
“There are some serious issues there so if someone plans to advantage their fund in any way or they’re going to deal on a non-arm’s length basis with their fund, then they really need to get advice before they do that so that they've got a defensible position if the commissioner comes along some years later.”
Miranda Brownlee
21 December 2018
smsfadviser.com
Hot Issues
- ATO encourages trustees to use voluntary disclosure service
- Beware of terminal illness payout time frame
- Capital losses can help reduce NALI
- Investment and economic outlook, August 2024
- What the Reserve Bank’s rates stance means for property borrowers
- How investing regularly can propel your returns
- Super sector in ASIC’s sights
- Most Popular Operating Systems 1999 - 2022
- Our investment and economic outlook, July 2024
- Striking a balance in the new financial year
- The five reasons why the $A is likely to rise further - if recession is avoided
- What super fund members should know when comparing returns
- Insurance inside super has tax advantages
- It’s never too early to start talking about aged care with clients
- Capacity doubts now more common
- Most Gold Medals in Summer Olympic Games (1896-2024)
- SMSF assets reach record levels amid share market rally
- Many Australians have a fear of running out
- How to get into the retirement comfort zone
- NALE bill passed by parliament
- Compliance focus impacts wind-ups
- LRBA interest rates increase for 2025
- Income-free areas set to increase from 1 July
- Most Spoken Languages in the World
- Middle-to-higher incomes boosting SMSF growth
- Investment and economic outlook, May 2024
- Transitioning into retirement: What you should know
- Plan now to take advantage of stage 3 tax cuts
- Deeming freeze a win for Age Pensioners
Article archive
- April - June 2024
- January - March 2024
- October - December 2023
- July - September 2023
- April - June 2023
- January - March 2023
- October - December 2022
- July - September 2022
- April - June 2022
- January - March 2022
- October - December 2021
- July - September 2021
- April - June 2021
- January - March 2021
- October - December 2020
- July - September 2020
- April - June 2020
- January - March 2020
- October - December 2019
- July - September 2019
- April - June 2019
- January - March 2019
- October - December 2018
- July - September 2018
- April - June 2018
- January - March 2018
- October - December 2017
- July - September 2017
- April - June 2017
- January - March 2017
- October - December 2016
- July - September 2016
- April - June 2016
- January - March 2016
- October - December 2015
- July - September 2015
- April - June 2015
- January - March 2015
- October - December 2014
January - March 2019 archive
- When super isn't compulsory
- Investors brace for Brexit - deal or no deal
- ATO identifies SMSF contravention red flags
- Extra website resources and tools is one way we offer you and your family more.
- Tax and estate planning traps flagged with pension restructures
- A checklist for a healthy financial year
- High-risk LRBAs, TBAR on the ATO’s radar this year
- All you need to know about how Australia is going.
- Royal Commission report makes super fee recommendations
- Four tips for boosting your super balance
- New Year resolutions, New Year strategies
- Part 4 - The major benefit of ‘behavioural coaching'
- 3 tips for weathering the market's bumpy ride
- Common BDBN ‘pitfalls’ flagged in wake of ASIC action
- Case law points to ‘growing importance’ of SMSF document chain
- How Australia is performing.
- Global outlook summary: Down but not out
- Australia - a comprehensive run-down of our vital statistics.
- Your guide to smarter holiday reading
- Verifying asset values in a SMSF.
- Admin, BDBN errors flagged for SMSFs this year
- ATO targets non-arm's length income - NALI
- Retiring in their 30s or 40s?