SMSF specialist adviser Mark Ellem said while the removal of insurance commissions by an adviser with their own SMSF who has written the insurance contract would result in lower insurance premiums, it would not be considered expenditure of a general nature.
“The insurance premiums, being the relevant expenditure, would be considered specific to the insurance policy and not expenditure that is of a general nature. Consequently, only the ordinary and statutory income from the insurance policy would potentially be caught by the broadened NALI rules,” he explained in an online Accurium article.
“However, income from an insurance policy is taxed under the capital gains tax provisions and is specifically exempt from the capital gain rules under section 118-300 Tax Act 1997. Consequently, even if the NALI provisions apply, there is no ordinary or statutory income to be treated as NALI.”
Alternatively, if the commission is considered to be a “fee” for the insurance advice, then such expenditure or lack of such expenditure would also be regarded as specific to the asset of insurance, he said.
Mr Ellem said the SMSF industry would still need to wait until the final version of LCR 2019/D3 is released by the ATO, however.
“Where a view is taken that such expenditure is of a general nature, PCG 2020/5 would apply until 30 June 2021 and we await further guidance from the finalisation of LCR 2019/D3.”
