Multiple employers SG opt out and Non arm’s length expenses

Treasury Laws Amendment (2018 Superannuation Measures No. 1) Bill 2019 was passed by both Houses of Parliament on 19 September 2019. The initial bill was dropped last financial year and was reintroduced in July 2019. The September 2019 edition of Super Tech focused on the amendment of total superannuation balances (TSB) in certain circumstances, for limited recourse borrowing arrangements. The bill also made amendments to:

  • Superannuation – employees with multiple employers
  • Non-arm’s length income of superannuation entities

Superannuation – employees with multiple employers

From 1 January 2020, eligible individuals with multiple employers can apply to opt out of receiving Super Guarantee (SG) from some of their employers. Clients may be eligible to opt out if they:

  • have more than one employer, and
  • expect employers' mandated concessional super contributions to exceed concessional contributions cap for a financial year

An application must be made by the employee and lodged at least 60 days before the first day of the first quarter that the application relates to. An exemption certificate can be for a period of up to four quarters in one financial year. A separate application is required for each financial year.

With November 2019 fast approaching, please ensure you notify clients that could be eligible for the SG opt out exemption.

Non-arm’s length income (NALI) of superannuation entities

From 1 July 2018, the definition of NALI was expanded to where incurred expenses in deriving the income that are less than, including nil expenses, those which the SMSF would otherwise have been expected to incur if the parties were dealing on an arm's length basis.

The ATO has confirmed it will not enforce new rules around trustees providing accounting and other services to their own SMSF until the 2021 financial year.

Refer to law companion ruling LCR 2019/D3 for examples about when the ATO will view service/expense as NALI.

Trustees need to get a clear understanding in related party transactions concerning their SMSF. Factors that indicate an individual is performing activities in their individual capacity and not in their capacity as a trustee (or a director of a corporate trustee) include:

  • Individual charges fund for performing the services. The individual can still be acting in their individual capacity if they do not charge the fund
  • Individual uses the equipment and other assets of their business, or used in their profession or employment
  • Individual performs the activities pursuant to a licence and/or qualification relating to their business, or their profession or employment
  • Activity is covered by an insurance policy relating to their business, or their profession or employment

Please ensure that both you and your clients are aware of the new NALI expense provisions, as it could result in the highest marginal tax rate being applied to all the income of the fund.

How can Partners Wealth Group help?

If you have any questions, require assistance or would like further clarification on any aspect of your clients’ needs, contact John Lethbridge today on 1800 333 143 to discuss your specific requirements.