The ATO is reminding self-managed super funds (SMSFs) of the rules regarding non-arm’s length income from trusts.
The non-arm’s length income rules can apply to investments, transactions and other arrangements undertaken by SMSFs when the terms of the relevant investment, transaction or arrangement are uncommercial in nature.
If income is distributed from a discretionary to a SMSF beneficiary, it is:
– automatically deemed non-arm’s length income of the SMSF (regardless of the nature of the dealings of the relevant parties)
– taxable at the highest marginal tax rate.
Income received by a SMSF that is a fixed entitlement to trust income is also non-arm’s length income if it is:
– income from a scheme where the parties were not dealing with each other at arm’s length
– more than the SMSF might have expected to derive if the parties were dealing with each other at arm’s length.
If you are unsure whether income from trusts is considered arm’s length income, contact our office.
The Superannuation (Unclaimed Money and Lost Members) Act 1999 (SUMLMA), more commonly known as the unclaimed superannuation money protocol, has been updated recently to provide a clearer structure going forward.
SUMLMA provides guidance on in relation to unclaimed money, lost member accounts, superannuation accounts of former temporary residents and their associated reporting and payment obligations. The update has now added content on inactive low balance accounts.
The act now clearly defines what is an inactive low-balance account, how statements and payments work, the registering of lost members and various rules for special cases.
It is important to note that the information in the protocol does not apply to super providers that are trustees of a state or territory public sector super scheme, in which:
The state or territory has laws requiring the reporting and payment of unclaimed super money to the state or territory government. Or;
The state or territory public sector super scheme complies with relevant state or territory laws.
The protocol provides administrative guidance only and should not be taken as a replacement for the law or technical reporting specifications.
