Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Bill 2023 was passed by the Senate on 25 June 2024.
Schedule 7 to the Bill makes changes to improve the operation of the rules in relation to non-arm’s length expenses that were introduced by the Treasury Laws Amendment (2018 Superannuation Measures No.1) Act 2019.
The following changes were made.
Non-arm’s length expense rules only apply to SMSFs and small APRA-regulated funds. All other complying superannuation entities are exempt.
The amount of non-arm’s length income taxed at the highest marginal tax rate is twice the difference between the amount that would have been expected to have been incurred for a general expense at arm’s length, and the amount actually incurred, with no deductions applying against the amount.
The fund’s total non-arm’s length component cannot exceed the fund’s assessable income minus deductions, excluding assessable contributions and deductions against them. Assessable contributions minus related deductions are always part of the low tax component.
Expenses incurred or expected to have been incurred before 1 July 2018 can’t result in the application of the non-arm’s length expense rules.