Note – due to production difficulties just prior to Christmas in 2021 this submission was submitted on Tax Institute letterhead. It was worked on by all industry associations including Chartered Accountants ANZ.

The joint professional and industry associations – noted in Appendix A – wrote to Treasury seeking its support for the super fund non-arm’s length income and expense provisions to be amended to removed unintended consequences.

Following the release of the ATO’s recent Law Companion Ruling LCR 2021/2 (LCR) and Practical Compliance Guideline PCG 2020/5 (PCG), it has become evident that the administration of the provision is broader than the original policy intent.

The professional and industry associations are supportive of the original policy intent of the provision as outlined in Appendix B (of the letter). We agree with its purpose.

It was only once the ATO’s recent interpretative guidance containing various examples was released that the full implications of the provision became apparent. These implications had not been fully considered in the original consultation.

It was only once the ATO’s recent interpretative guidance containing various examples was released that the full implications of the provision became apparent. These implications had not been fully considered in the original consultation.

The ATO’s recent interpretative guidance highlights the Bodies’ concerns with the broad implications of the provision that clearly have implications beyond those originally intended. Accordingly, we consider that the law needs to be amended so that superannuation fund members do not face adverse and unintended tax implications and their retirement benefits are not depleted in inappropriate circumstances, both for APRA-regulated funds and self-managed superannuation funds (SMSFs).

A proposed solution was contained in Appendix C.