Identifying when a scheme will be caught by the new non-arm’s length expenditure rules
Broadly, determining whether the new non-arm’s length expenditure rules will trigger the application of the NALI provisions will require consideration of the following:
- Identify that there is a ‘scheme’, which is defined in S.995-1(1) as “any arrangement, or any scheme, plan, proposal, action, course of action or course of conduct, whether unilateral or otherwise”. This is a very broad definition that could include a large number of transactions or arrangements (formal or informal) entered into by an SMSF, including (but not limited to):
- engaging another party to perform a service;
- acquiring an asset from another party; and
- entering into a contract or other undertaking with another party (e.g., entering into an LRBA with the other party).
While a scheme can be undertaken by a single party, the NALI provisions involve dealings between at least two parties, or a party acting in more than one capacity (e.g., the trustee of an SMSF).
- The parties to the scheme are not dealing with each other at arm’s length. Note that the concept of ‘non-arm’s length’ takes its ordinary meaning and is not restricted to dealings with parties that are ‘associates’ (for income tax purposes) or ‘related parties’ (for SIS purposes). For example, a scheme that involves an SMSF dealing with a fund member’s friend or work colleague may potentially be caught under the NALI provisions.
- Should you have any queries, please contact Tax Ideas Accountants & Advisers on +61 2 83181545
- Alternatively, you can book an appointment in our live calendar.
- Topics on self-managed superannuation fund – SMSF (1)
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- Topics on self-managed superannuation fund – SMSF (5)
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- Topics on self-managed superannuation fund – SMSF (8)
- Topics on self-managed superannuation fund – SMSF (9)
- Topics on self-managed superannuation fund – SMSF (10)
- Topics on self-managed superannuation fund – SMSF (11)
- Topics on self-managed superannuation fund – SMSF (12)
- Topics on self-managed superannuation fund – SMSF (13)
- Topics on self-managed superannuation fund – SMSF (14)
- Topics on self-managed superannuation fund – SMSF (15)
- Topics on self-managed superannuation fund – SMSF (16)
- Topics on self-managed superannuation fund – SMSF (17)
- Topics on self-managed superannuation fund – SMSF (18)
- Topics on self-managed superannuation fund – SMSF (19)
- Topics on self-managed superannuation fund – SMSF (20)
