Chartered Accountants ANZ Calls for ATO Review of NALI Guidance Material

Chartered Accountants ANZ has called on the Australian Taxation Office (ATO) to review its guidance material on non-arm’s length income (NALI) following a recent Administrative Appeals Tribunal (AAT) decision.

The case in question involved the trustee of a self-managed superannuation fund (SMSF) who was the sole unit holder of a unit trust, JJUT, with fixed entitlement to distributions. Through a complex series of loan agreements, funds were lent between entities, including a related discretionary trust and unrelated third parties.

The ATO argued that the lack of a margin on interest rates between lenders suggested a non-arm’s length arrangement, but the Tribunal ultimately ruled in favor of the SMSF trustee. Despite this outcome, CA ANZ has urged the ATO to take a more pragmatic approach and update its guidance material to reflect the AAT decision.

CA ANZ emphasized the importance of clear documentation and substantiating records for SMSF trustees and their advisers to demonstrate that any arrangements are on a commercial basis. The professional body also highlighted the upcoming changes in non-arm’s length expenditure laws and called for additional guidance to support trustees and advisers through these changes.

In response to the AAT decision, CA ANZ recommended updating tax ruling TR2006/7 and developing a law administration practice statement to guide ATO staff in determining NALI. The organization believes that enhanced guidance will provide clarity and support for SMSF trustees and their advisers as they navigate complex tax matters.