The superannuation rules apply tax at the highest marginal personal tax rate on any income which is not earned on an “arms-length” basis.
Income which is more than might be expected from transactions where the parties are related are caught by these rules.
This means that:
- the transfer values of assets must be at market value
- certain ‘non-commercial’ arrangements, such as LRBAs with zero interest loans are considered to be non-arms length
- discretionary trust income is considered to be non-arms-length
- private company dividends may also be non-arms length unless consistent with an arm’s length dealing
The government has also introduced legislation to extend the NALI rules to situations where the expenses of an SMSF are less than would be expected from an arm’s length dealing.
The new rules are to have application from 1 July 2018. For progress through parliament see Treasury Laws Amendment (2018 Superannuation Measures No. 1) Bill 2018
- Law Companion Ruling LCR 2018/D10 Non-arm’s length income – expenditure incurred under a non-arm’s length arrangement
- Changes to non-arm’s length income (NALI) rules for SMSFs
- Non-arm’s length income
- Taxation Ruling TR 2006/7 (‘special income’)
This page was last modified 2018-12-19