On Tuesday, 22 March, government confirmed it will consult on the laws – which are designed to prevent superannuation funds from circumventing contributions caps, and artificially inflating fund earnings through non-commercial dealings – noting previously-raised concern from industry stakeholders.
“We have heard the concerns of the industry and will work to amend the law to make sure it operates as intended,” Minister for superannuation, financial services and the digital economy, Jane Hume said.
“I’d like to thank all stakeholders that have engaged meaningfully on this issue so far.”
The SMSF Association welcomed the news, saying the rules in its current form could have “far-reaching and unjustifiable consequences” for super funds.
“It’s our considered view that the NALE rules go much further than originally intended. For example, there could be situations where all the income received by an SMSF, including taxable contributions and realised capital gains, is taxed at 45% because the SMSF failed to incur a small fund expense on arm’s length terms,” SMSF Association deputy CEO and director of policy and education, Peter Burgess, said.
“There could also be situations where all the income an SMSF receives from a particular investment, including any realised capital gains on selling the investment, is forever tainted as NALI because of a simple oversight.
“We understand what these provisions are trying to achieve. However, we have always maintained these new rules should not apply to general fund expenses.”
Similarly, Chartered Accountants Australia and New Zealand (CA ANZ) applauded the government’s move, having called for changes to the laws since 2019.
CA ANZ superannuation leader Tony Negline said the news is an “umbrella of hope” for super funds.
“The law and ATO ruling has been a dark cloud over the profession’s head who have been waiting with bated breath for the storm,” he said.
“We look forward to working with the government to narrow these rules so we can build, not deplete the retirement savings of Australians.”
The government is set to apply the legislative changes from 1 July 2022.
Is any announcement by a political party less than 2 months before an election really worth spending much time on? Reality will set in by about Empire Day (24 May 2022). The reality is that neither major political party likes SMSFs. Labor because SMSFs take money away from industry funds, Liberals and Nationals because SMSFs take money away from their mates in retail funds.