The non-arm’s length income (NALI) provisions for super funds will be amended from 1 July 2018 to reduce any opportunities for members to use related-party transactions on non-commercial terms to increase superannuation savings.
Specifically, the NALI provisions in s 295-550 of the Income Tax Assessment Act 1997 will be amended to ensure expenses that would normally apply in a commercial transaction are included when considering whether the transaction is on a commercial basis. A super fund’s non-arm’s length income (also known as “special income”) is taxed at 47% instead of the 15% concessional rate.
The measure will seek to ensure that the super reform legislation operates as intended. Essentially, it appears to be aimed at preventing individuals from using non-arm’s length arrangements with their superannuation fund to circumvent the pension balance cap and total superannuation balance threshold.