Understanding Exceptions to NALI Provisions for Internal Trustee Duties
In the draft Law Companion Ruling (LCR) 2019/D3, the ATO clarified that certain activities performed internally by trustees are exempt from Non-Arm’s Length Income (NALI) provisions. Here are the key factors indicating an individual's activity is performed in their individual capacity:
- If the individual charges the complying superannuation fund for their services, it suggests individual, not trustee, activity. However, charging the fund isn't necessary to indicate individual capacity.
- Use of the individual's business assets or assets related to their profession or employment supports individual activity.
- Performing activities based on professional licenses or qualifications further suggests individual, not trustee, action.
- If the activity is covered by insurance relevant to the individual's business or profession, it indicates individual involvement.
When trustees provide services as third parties rather than in their trustee capacity, NALI provisions may apply. However, if the charges for such services are at arm's length, NALI provisions won't apply. Note that S.17B of the SIS Act prevents trustees from overcharging, allowing only arm's length prices for non-trustee services.
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