Large Fund Superannuation SMSF

Draft Taxation Determination TD 2023/D1 – Income tax: how the non-arm’s length income and capital gains tax provisions interact to determine the amount of statutory income that is non-arm’s length income

Published Date: 2 Aug 2023


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Chartered Accountants Australia and New Zealand, CPA Australia, the Institute of Public Accountants, the SMSF Association and The Tax Institute (the joint professional bodies) have been working with the Australian Taxation Office (ATO) for many years in relation to the superannuation fund non-arm’s length income and expense (NALI/E) provisions.

In late 2021, the joint professional bodies, together with a number of other associations, submitted to the ATO a range of questions and concerns involving the superannuation fund NALI/E income provisions. A number of those issues involved how those provisions interact with the capital gains tax (CGT) provisions.

We are pleased that the ATO has commenced work on this matter and appreciate the opportunity to comment on the above draft Taxation Determination (draft TD).

Legislation governing non-arm’s length income and expense (NALI/E) provisions not settled

As you are aware, Treasury has recently consulted on proposed changes to the NALI/E provisions in the Income Tax Assessment Act 1997 (ITAA97). This consultation follows an announcement by the government as part of the Federal Budget 2023–242.

The final form of the NALI/E rules is currently unknown, given that they are likely to be amended. 

We therefore request that the ATO not finalise this draft TD until the law has been settled. If necessary, we request that, after the NALI/E provisions have been settled, the ATO republish the draft TD with suitable amendments as a revised draft before it is finalised.

In relation to the draft TD, we make the following points that we consider should be factored into any further drafts of the TD as well as the final TD:

  • The examples in the draft TD deal only with specific expenses for self-managed superannuation funds (SMSFs) – we consider that examples involving large APRA-regulated superannuation funds would also be helpful.
  • It would be useful if the draft TD included examples as to how earnings for segregated and unsegregated pension assets would be treated under the NALI/E and CGT provisions.

We note that the current examples in the draft TD involve single trustees of SMSFs. As the ATO is aware, other than in rare situations, SMSFs are not permitted to have a single trustee regardless of how many members a fund might have. We therefore suggest the ATO adjust the examples in the draft TD so they reflect the correct regulatory framework.

We consider that there may be a calculation error in Step 4 of paragraph 21 of the draft TD. Based on the numbers, it seems that the result should be $883,333.33, not $833,333.33 that is currently in the draft TD.


  • Published On:2 Aug 2023

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Large Fund Superannuation SMSF SIS Act Private wealth Capital Gains Tax (CGT)

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