Author: Brenda Hutchinson, Partner, TAG Financial Services
When LCR 2021/2 was issued by the ATO, with its accompanying PCG 2020/5, there was much consternation in the accounting fraternity, particularly around trustees (in this case, accountants) providing services to their own funds, at little or no, cost.
Whilst these concerns still need to be addressed and clarified, welcome relief was received in June 2022, in the form of an announcement from the ATO.
What did the announcement include?
The announcement, issued by the ATO, outlined that they are extending the transitional compliance approach to 30 June 2023.
What does this mean?
It means that the ATO will not devote any compliance resources to determine whether a fund has NALI (Non-Arm’s Length Income) until 1 July 2023.
Does this mean we can provide accounting services to our own funds, using the software in our practice, and not charge a fee?
The ATO have clarified that these services will fall into the category of expenditure of a general nature that has sufficient nexus to all income of the fund. As a result, it will fall into the category that the ATO will NOT dedicate compliance resources to.
While we do have an additional 12 months, you should be thinking about how you are going to address this issue. Remember, you can offer these services at a discounted rate, so long as all team members at your firm are offered the same discounted rate.
What did the announcement not include?
Even though we have been provided with a 12-month extension to the transitional compliance approach, there are some items that will be captured under LCR 2012/2 now.
Some of these include:
• Acquiring an asset for less than the market value
• Where the SMSF invests in a related company or trust, and there is expenditure on a particular asset in that company or trust, which is not at an arm’s length cost
• Where services for a particular asset are charged at less than market value cost.
As you can see, the difference in what applies now as opposed to what falls under the extension, is around where the expenditure applies to a “particular” asset, or general expenditure that applies to “all” assets (and therefore, income) of the fund.
Learn more at our Super Seminar
As part our Superannuation Strategies Seminar next week, we are providing a bonus Audit Webinar, where we will be covering this topic in more depth, including more detail surrounding what has been released, what are the options for the ATO and whether legislative amendments need to occur.
Click below to learn more or register now!
Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2022. Please do not reproduce without the expressed written consent of the author.