Do you provide services to your SMSF?
The government reintroduced its Treasury Laws Amendment (2018 Superannuation Measures No.1) Bill 2019 into Parliament a few months ago, which has recently been passed into legislation. This development holds significance for SMSF accountants and their clients.
At the time, advisers were contemplating whether these measures would present problems for trustees who may be providing financial services to their own fund, which they may not be allowed to charge for under the current super laws.
For example:
– if a financial planner provides investment advice to their own SMSF, or
– if an accountant provides tax return and accounting services to their own SMSF, or
– if a real estate agent provides property management services to their own SMSF, or
– if a solicitor provides trust deed or death benefit documentation services to their own SMSF
but doesn’t charge their fund a fee for that advice or service. Have they provided a service now caught by these new “non-arms length income” (NALI) rules?
If a fund breaches these new NALI rules, the result is that the fund’s income is taxed at 45% (instead of 15%).
This seems a very harsh result for something where most advisers can’t see any or much cost to government revenue. Is not charging your SMSF a market rate fee for an immaterial service that large of an evil that it warrants such an extreme penalty?
The ATO has recently announced that it “……. will not allocate compliance resources to determine whether the NALI provisions apply to a complying superannuation fund for the 2018-2019 or the 2019-2020 income years……”.
This is because the ATO now recognises that some trustees of SMSFs may not have realised that the proposed amendments may apply to them and to give those trustees time to correct their practises.
The ATO has also clarified that financial services professionals who provide services in a business capacity to their own SMSF for less than the market rate could see all the fund’s income attract the top tax rate of 45%.
However, if the trustee provides services such as accounting or financial advice or property management in a personal capacity, the SMSF’s income will not be treated as NALI.
The distinction between services provided to an SMSF in a business capacity versus a personal capacity is now significant – but open to interpretation.
Kreston Stanley Williamson Team
*Correct as of October 2019
Disclaimer – Kreston Stanley Williamson has produced this article to serve its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas in this article, you must seek advice about your circumstances. Liability is limited by a scheme approved under professional standards legislation.
