The federal government has not addressed concerns from the SMSF sector regarding non-arm’s-length income (NALI) and non-arm’s-length expenditure (NALE) in its October budget and also remained silent on the fate of legacy pensions.
The two issues were not included in the budget speech by Treasurer Jim Chalmers or in the budget papers released by Treasury and the omission was noted by SMSF Association chief executive John Maroney.
“The NALI/NALE rules, which took effect on 1 July 2018, could have far-reaching and unjustifiable consequences for all superannuation funds, including SMSFs, and we have long advocated the need for reform,” Maroney said.
SuperConcepts SMSF technical support executive manager Nicholas Ali told smstrusteenews that larger economic considerations were likely to have crowded out more niche issues and changes to the NALI/NALE rules were still in the pipeline.
“In this budget there are some much bigger issues and things like NALI were put to the wayside, but I reckon there will be some specific announcement at some point,” Ali said.
“I thought clearing up the general expenses problem was something they could have just done as a matter of course as a good change to the superannuation rules, but perhaps in this ‘mini-budget’ there were bigger fish to fry.
“This government seems conducive to the logic behind the general expenses rule, so there would have to be some sort of announcement in the not-too-distant future.”
Maroney said the addition of an amnesty period to allow SMSF members stuck in legacy pensions to convert to more conventional-style pension products would have been a significant reform.
Colonial First State head of technical services Craig Day said the absence of information regarding legacy pensions raised the question of whether any action at all would be taken on the issue.
“There is absolutely nothing in the budget about the two-year window to commute certain legacy pensions, so we don’t know what the position of that measure is and even if they are still thinking about it or whether they are not going to proceed with that measure,” Day told smstrusteenews.
Heffron managing director Meg Heffron added, “the loud silence on this issue suggests it is simply not on the Government’s radar.”
“This is bitterly disappointing. It’s a change that is long overdue, creates no great revenue leakage for the government, recognises that the tax and regulatory environment has moved on enormously since people put these in place and is simply the right thing to do.
“The fact that it hasn’t been done yet beggars belief.”
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