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  • Extending transitional compliance approach to non-arm’s length expenditure – SMSF auditor obligations

    We recently extended our transitional compliance approach set out in Practical Compliance Guideline PCG 2020/5 Applying the non-arm’s length income provisions to ‘non-arm’s length expenditure' - ATO compliance approach for complying superannuation entities to cover the 2021-22 income year.

    The PCG now applies to the 2018-19 to 2021-22 income years.

    The extension has been provided while we finalise Draft Law Companion Ruling LCR 2019/D3 Non-arm’s length income – expenditure incurred under a non-arm’s length arrangement.

    As outlined in PCG 2020/5 we will not allocate compliance resources to determine whether the income of a complying super fund is non-arm’s length income (NALI) where the fund incurred non-arm’s length expenditure of a general nature that has a sufficient nexus to all ordinary and or statutory income derived by the fund.

    As a result of the extension, you do not need to modify your opinion in Part A of the IAR for the income years where the ATO’s transitional compliance approach in PCG 2020/5 applies.

    However, you will still need to consider modifying your opinion in Part A of the IAR where the fund incurred non-arm’s length expenditure that directly related to the fund deriving particular ordinary or statutory income as the compliance approach in PCG 2020/5 does not apply.

    We will let you know when we have finalised the content of draft LCR 2019/D3 and what it means for you.

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      Last modified: 20 Apr 2021QC 65327