Super Funds: Non-Arm’s Length Expenses Consultation Open

Australian Treasury

The Albanese government will always look for ways to strengthen Australia’s world-class superannuation system.

Robust, proportionate integrity measures are an important part of maintaining confidence and providing clarity to trustees.

Today we are releasing a consultation paper considering options to amend the non-arm’s length income (NALI) provisions which apply to superannuation funds.

The NALI provisions are designed to prevent income from being unduly diverted into superannuation funds to benefit from lower rates of tax.

While the NALI provisions are operating broadly as intended, the government appreciates some superannuation industry stakeholders have raised the potential for disproportionately severe outcomes for breaches relating to general expenses.

For the purposes of stakeholder consultation Treasury has developed potential policy changes to the NALI provisions, where they relate to general expenses which have a sufficient nexus to all ordinary and statutory income derived by the fund.

Potential amendments to the NALI provisions for superannuation funds could be adopted as follows:

  1. Self-managed superannuation funds and small APRA-regulated funds would be subject to a factor-based approach which would set an upper limit on the amount of fund income taxable as NALI due to a general expenses breach.
  2. Large APRA-regulated funds would be exempted from the NALI provisions for general expenses.

The approach outlined in the consultation paper seeks to balance maintaining the integrity of the tax system with providing a greater level of certainty for trustees regarding the consequences of any breaches relating to general expenses.

The government encourages all interested parties with views on these proposals to make a submission in response to the consultation paper which can be found on the Treasury website.

The consultation process and any comments received in relation to the potential amendments outlined in this paper will help inform the development of future policy regarding the NALI provisions.

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