ATO's Stance on 'General' Expenses Raises Concerns for Accountants
The explanatory memorandum (EM) accompanying the Bill emphasizes that for non-arm’s length expenditure to trigger the NALI provisions, the expenditure must relate to specific amounts of income. Paragraph 2.38 of the EM offers guidance, stating that there must be a clear connection between the expenses and the income they help generate.
However, the ATO's interpretation in LCR 2019/D3 takes a more stringent approach to the non-arm’s length expenditure rules, especially concerning 'general' expenses incurred by a superannuation fund. These are expenses that can't be tied to specific income amounts.
According to the EM, once the relevant income is identified and treated as NALI, other income of the fund wouldn't be considered NALI. However, the ATO's position appears more aggressive than what Parliament likely intended when introducing the new rules.
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