There were two major issues we were expecting clarification on.
The additional tax proposal for high balance fund members barely rated a mention except to confirm it was happening. Mentioning it did allow the, marginally increased, expected tax take to be included in Budget revenues but there was no new detail regarding the lack of indexation or calculation methodology. Presumably the Government had more urgent items to attend to given that this measure is not intended to be introduced until after the next federal election.
The announcement on non-arms length expenditure, NALE, added some new detail to the many twists and turns that have occurred since it was first considered in 2018. Further clarification is required but, in essence:
- If a fund’s general expenditure is lower than an arm’s length situation all of the fund’s income WILL NOT be taxed at the top marginal rate as initially announced. Instead, the amount of NALE will be capped at twice the general expense shortfall so, if the shortfall was $4,000, the 45% tax rate would be capped at twice this number – $8,000 x 45% = $3,600.
- Contributions are excluded from fund income for this purpose.
- Large APRA funds are excluded.
It is expected that the ATO will not be extending its no compliance activity approach after 30 June 2023 so work that is carried out after that date, even if it’s for a previous financial year, could result in NALE being applied.
