The Australian Taxation Office has announced how it will apply the non-arm’s length income provisions to “non-arm’s length expenditure” in its latest practical compliance guideline.
ATO reveals approach to NALE under NALI provisions
In PCG2020/5 released yesterday, the ATO sets out a transitional compliance approach for a complying superannuation entity concerning the application of the amendments to section 295-550 of the Income Tax Assessment Act 1997, where a superannuation entity incurs certain non-arm’s length expenditure (or where expenditure is not incurred) in gaining or producing ordinary or statutory income.
The regulator said PCG2020/5 should be read in conjunction with draft Law Companion Ruling LCR 2019/D3 Non-arm’s length income – expenditure incurred under a non-arm’s length arrangement.
In the guide, the ATO defined a complying superannuation entity as a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust.
“The ATO will not allocate compliance resources to determine whether the NALI provisions apply to a complying superannuation fund for the 2018–19, 2019–20 and 2020–21 income years where the fund incurred non-arm’s length expenditure of a general nature that has a sufficient nexus to all ordinary and/or statutory income derived by the fund in those respective income years (for example, non-arm’s length expenditure on accounting services),” the regulator said.
“This transitional compliance approach does not apply where the fund incurred non-arm’s length expenditure that directly related to the fund deriving particular ordinary or statutory income.”