Non-arm’s length expense rules for superannuation funds

16 days left to have your say
Date
-
Consultation Type
Consultation Paper

Key Documents

The government has released a consultation paper considering options to amend the non‑arm’s length income (NALI) provisions which apply to superannuation funds.

While the NALI provisions are operating broadly as intended, the government appreciates some superannuation industry stakeholders have raised the potential for disproportionately severe outcomes for breaches relating to general expenses.

For the purposes of stakeholder consultation Treasury has developed potential policy changes to the NALI provisions, where they relate to general expenses which have a sufficient nexus to all ordinary and statutory income derived by the fund.

Potential amendments to the NALI provisions for superannuation funds could be adopted as follows:

  • Self‑managed superannuation funds and small Australian Prudential Regulation Authority (APRA) funds would be subject to a factor‑based approach which would set an upper limit on the amount of fund income taxable as NALI due to a general expenses breach. The maximum amount of fund income taxable at the highest marginal rate would be 5 times the level of the general expenditure breach, calculated as the difference between the amount that would have been charged as an arm’s length expense and the amount that was actually charged to the fund. Where the product of 5 times the breach is greater than all fund income, all fund income will be taxed at the highest marginal rate.
  • Large APRA‑regulated funds would be exempted from the NALI provisions for general expenses.

The potential approach outlined in the consultation paper seeks to balance maintaining the integrity of the tax system with providing a greater level of certainty for funds that the consequences of any breaches relating to general expenses would be proportionate to the magnitude of that breach and ensuring the rules are appropriately focussed.

The consultation process and any comments received in relation to the potential amendments outlined in this paper will help inform the development of future policy regarding the NALI provisions.

Responding

You can submit responses to this consultation up until 21 February 2023. All superannuation industry stakeholders, along with other interested parties, are encouraged to provide input on the consultation paper.

While submissions may be lodged electronically or by post, electronic lodgement is preferred. For accessibility reasons, please submit responses sent via email in a Word or RTF format. An additional PDF version may also be submitted.

All information (including name and address details) contained in submissions will be made available to the public on the Treasury website unless you indicate that you would like all or part of your submission to remain in confidence. Automatically generated confidentiality statements in emails do not suffice for this purpose. Respondents who would like part of their submission to remain in confidence should provide this information marked as such in a separate attachment.

Legal requirements, such as those imposed by the Freedom of Information Act 1982, may affect the confidentiality of your submission.

View our submission guidelines for further information.

How To Respond

Email

superannuation@treasury.gov.au

Post

Address written submissions to:

Retirement, Advice and Investment Division
Treasury
Langton Cres
Parkes ACT 2600

Enquiries

Email: superannuation@treasury.gov.au