The ATO ruling confirmed that the general expense cannot have a direct link to the income of the fund and that non-arm’s length expenditure (NALE) can have a sufficient nexus to all the ordinary and/or statutory income derived by the fund.

The ATO last year also announced an extension on the transitional compliance approach in PCG 2020/5 for another 12 months, which means it will not allocate compliance resources in the 2021-22 financial year to determine whether the NALI provisions apply to all the income of the fund where it incurs non-arm’s length expenditure of a general nature.

With 1 July 2022 not far off, Heffron managing director Meg Heffron said accountants and advisers should be thinking carefully about what services they’re providing to their SMSF.

“Whilst the final version of the ATO’s ruling was a little more practical than the first version, it’s still probably going to mean that a lot of advisers and accountants need to look carefully at their own practice,” Ms Heffron told SMSF Adviser.

“You’ve got some blatant cases like my own where I’ll have to start paying for my SMSF administration – not to me but to the company – but you’ve also got other cases where accountants might be using resources and specific licences of their employer, which means they need to be careful about making sure that they’ve got a reasonable basis for the amount that their businesses charge the SMSF.”

SMSF firms may need to think about their policies around the use of the firm’s software and the accounts being completed by the firm’s staff at perhaps a discounted rate.

“[You] just need to make sure there’s a clearly articulated policy around staff discounts so that can be argued to be arm’s length. So it’s a matter of looking at the arrangement you have and making sure it can be justified,” said Ms Heffron.

Ms Heffron also said that it’s a good idea for SMSF members to keep records of staff discounts or policies, given that it could be open to scrutiny.

“If there is a staff discount policy, they’d want to have that written down and they’d want to have that on their files that a staff discount policy applied to all people in a relevant group not just unique to them,” she said.