ATO issues compliance guideline on NALE approach

The latest guideline published on Monday provides a transitional compliance approach for a complying super 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 in gaining or producing ordinary or statutory income.

The PCG2020/5 defines complying superannuation entity as a complying superannuation fund, a complying approved deposit fund or a pooled superannuation trust.

The ATO noted that this guideline 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.

“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 (as described in paragraphs 9 to 12 of LCR 2019/D3) 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 Tax Office has 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.”

For more information on the guideline, click here.