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Non-arm’s length income from trusts and SMSFs

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.

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News

Do you know where your super is?

February 21, 2019

If you’re not close to retiring, you may not be thinking about your super or where it is. Even if you are a way off from retiring, you should be keeping track of where your super has gone. $17.5 billion of super was lost in 2017-18, $420 million down from the previous year. If you are not paying attention to your super contributions, accounts and insurances, you may have lost super. You may also have unintentionally lost track of super if you have ever changed your name, address, job or lived overseas.

It is not uncommon for people to have multiple super accounts they have acquired over the years of working at different companies. Having multiple unused accounts can result in high fees that drain your untouched super or you could lose track of it completely. It is in your best interest to consolidate all super into one account that suits your retirement goals. When closing unused accounts, you should be mindful of any termination fees, insurance policies, investment options, and ongoing service fees.

If you have lost track of your super it may be held by either your super fund as a lost account or as an ATO-held account. The easiest way to consolidate super is through the myGov website, linking the ATO to records of your super funds