Show download pdf controls
  • Recent law changes affecting SMSFs

    Two previously announced integrity measures included in Treasury Laws Amendment (2018 Superannuation Measures No. 1) Bill 2019External Link have now been enacted with an effective date of 1 July 2018.

    NALI provision amendments

    The definition of Non-arm's length income (NALI) has been expanded. It now explicitly says, from the 2018-19 income year onwards, the ordinary or statutory income of a super fund will be NALI and taxed at the top marginal rate where there is a scheme in which the parties are not dealing with each other at arm's length and the fund incurs:

    • a loss, outgoing or expenditure (including a nil amount), in gaining or producing the income, that is less than what would be expected had the parties dealt with each other at arm's length in relation to the scheme; or
    • a loss, outgoing or expenditure (including a nil amount) to acquire a fixed entitlement to the income of a trust or in gaining or producing the income from a fixed entitlement that is less than would be expected had the parties dealt with each other at arm's length in relation to the scheme.

    We have published a draft LCR 2019/D3 for guidance and feedback on this change.

    LRBA amounts now included in TSB calculation

    The calculation of an individual’s total superannuation balance (TSB) will include, in certain circumstances, the outstanding Limited recourse borrowing arrangement (LRBA) amount attributable to each member's interest where the self-managed super fund (SMSF) has an LRBA that was made under a contract entered into on or after 1 July 2018.

    This will apply if:

    • the LRBA is with an associate of the SMSF – in this case all members of the fund whose interest is supported by the asset purchased with the LRBA must include their portion of the outstanding balance of the LRBA amount in their TSB calculation
    • a member of the fund met a condition of release with a nil cashing restriction - in this case, the member must include the outstanding LRBA amount attributable to their super interest in their TSB calculation.

    This change doesn't include the refinancing of an LRBA that was made under a contract entered into before 1 July 2018, where both the following apply:

    • the new borrowing is secured by the same asset or assets as the old borrowing
    • the refinanced amount is the same or less than the existing LRBA.

    Things to consider

    We've updated our SMSF annual return instructions 2019 to let you know how to report NALI and LRBA amounts for 2018–19. If you've already lodged your 2019 SMSF annual return, and are affected by these new measures, you may need to amend your return. We will contact you to determine this.

    If you're a member of an SMSF that has an LRBA affected by this new law, your TSB on ATO online services may be inaccurate. We're updating our systems and your TSB will be accurate at the earliest by March 2020. If you're affected you'll need to recalculate your own TSB by adding your share of the outstanding LRBA amount to the TSB amount displayed on ATO online.

    See also:

    Keep up to date:

      Last modified: 03 Oct 2019QC 60243