Self-managed super funds (SMSFs) must transact on an arm's length basis.
Changes to the non-arm's length income (NALI) provisions in the Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Act 2024External Link are now law and take effect from 1 July 2024.
The changes:
- limit the amount of NALI arising from a non-arm's length general expense for small superannuation funds to twice the difference between the actual expense and the expected market rate of the expense
- exempt large APRA regulated funds from the non-arm's length expenditure (NALE) provisions for both general and specific expenses of the fund, and confirm the remaining NALI rules continue to apply
- exempt the application of the NALE provisions, as amended by the Act, for expenditure that occurred prior to the 2018–19 income year
- apply from 1 July 2018.
As these changes are retrospective and apply from 1 July 2018, you'll need to consider any impacts to your fund and report any non-arm's length general expenses in accordance with the new law.
The ATO’s administrative approach in PCG 2020/5: Applying the non- arm’s length income provisions to ‘non arm’s length expenditure’ expired on 30 June 2023 and will not be extended given the passing of the new legislation.
If you're unsure if your SMSF is impacted by these changes you should speak to your tax or super professional.
You can find out more about Non-arm's length income on our website.
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