SMSFs – Non Arms Length Income (NALI)

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 legislated 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 have application from 1 July 2018. See Treasury Laws Amendment (2018 Superannuation Measures No. 1) Bill 2018

See further


This page was last modified 2021-04-12