While the ATO’s draft ruling on the NALI provisions helped outline how the changes would apply, it is still unclear what happens where the member was previously licensed to provide a service but is now retired, says a technical expert.
In December last year, the ATO released draft law companion ruling LCR 2018/D10 on the proposed changes to non-arm’s length income which eased concerns about a technical issue which was previously raised by the industry.
Before the ATO released the draft ruling, there was concern that the NALI provisions could apply if no fee is charged even though the trustee would be prevented from charging a fee under section 17B because they are not licensed to provide that service, explained SuperConcepts technical services specialist Nicholas Ali.
Under 17B of the SIS Act, a fund can only charge for a service, he explained, where the trustee is licensed to perform that type of service and they’re providing that kind of service to the community.
Mr Ali said that the draft ruling helped clarify that where a trustee provides a service to their fund and they are not able to charge their fund because they are not licensed to provide that service, the non-charging of that fee would not invoke the new NALI rules.
However, what is still unclear is what would happen in a situation where someone is retired and is providing services to their SMSF, Mr Ali told delegates at the SMSF Association National Conference.
“What if you had a scenario where there was a real estate agent who retired, he’s got property in his fund and he’s no longer a registered real estate agent, but he manages the property on behalf of his fund? That’s one area that still needs clarification," he said.
“The draft LCR from the ATO are explanatory memorandum, are unclear when NALI applies where the trustee provides a service and doesn’t charge but is licensed to provide the service, or perhaps was licensed to provide the service when they acquired the asset,” he said.
By Miranda Brownlee
21 February 2019