QUARTER I 2020 | ISSUE 029 | THE PREMIER SELF-MANAGED SUPER MAGAZINE
PROFILE LARA BOURGUIGNON
NALE NEW PAIN FOR TRUSTEES
FEATURE
STRATEGY
COMPLIANCE
AUDIT
NALE Nature and ramifications
High-end funds Characteristics and issues
Property holdings New regulations imposed
Investment strategy Professional implications
SMSF
Professionals Day
2020
Brisbane
Adelaide
Melbourne
Sydney
Webcast
21 May
26 May
28 May
02 Jun
02 Jun
REGISTRATION
OPEN
PRE-REGISTRATION BEFORE 29 MARCH
More information at www.smsmagazine.com.au/events
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COLUMNS Investing | 24
Value and growth approaches not mutually exclusive.
Investing | 28
Issues to consider with holding direct property.
Strategy | 32
What high-balance SMSFs are like.
Compliance | 38
Ingredients for a sound investment strategy.
Legal | 41
Possibility of state-based legislation becoming a reality.
Strategy | 44
The strength of an enduring power of attorney.
Strategy | 47
Unconventional ways carry-forward contributions may play a role.
Investing | 50
A look at the past decade and what the next one holds.
Audit | 53
NALE THE NEW ARM’S-LENGTH HEADACHE Cover story | 16
FEATURE Where to now for accountants’ licensing | 20
Accountants’ licensing once again under examination.
Professional obligations in reviewing the investment strategy.
Compliance | 56
New items to consider for reporting on property holdings.
Strategy | 59
The significance of fettering for estate planning.
REGULARS What’s on | 3 News | 4 SMSFA | 5 CPA | 9
PROFILES Lara Bourguignon | 14
CEO describes the restrictive nature of constant legislative change.
Leo Guterres | 36 Practice founder believes providing financial advice is a great opportunity for accountants.
SISFA | 10 IPA | 11 CAANZ | 12 Regulation round-up | 13 Super events | 62 Last word | 64 QUARTER I 2020
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FROM THE EDITOR DARIN TYSON-CHAN INAUGURAL SMSF ASSOCIATION TRADE MEDIA JOURNALIST OF THE YEAR
What’s it all about? During the final quarter of last year, the powers that be decided to extend the reach of the non-arm’s-length income (NALI) provisions to have them include non-arm’slength expenditure (NALE). As we all know by now, it means if any income of an SMSF was generated incorporating a situation where the fund benefited from receiving services charged on a non-commercial basis, that income is subject to being treated as NALI and as such taxed at the top marginal rate. Given the lack of foresight we’ve seen from Canberra in recent times, I’m really not sure if the implications of these new provisions were really understood when being formulated. To that end, the NALE rules now have a lot of accountants who have their own SMSFs running scared. That’s because they may have been performing the administration function for their fund at no cost, a situation that could now trigger the NALE provisions, putting all of their SMSF’s income at risk of being taxed at the top marginal tax rate. This includes capital gains. Considering the significant and severe nature of the NALE rules is now beginning to be understood, illustrated by the accountants’ situation, it’s difficult to understand what is trying to be achieved here. When the NALI legislation was enacted it was clear why it had come to pass. It stemmed from related-party loans to SMSFs that were issued with a 0 per cent interest charge. The ATO deemed this to be unsavoury and likely to cause compliance issues for the funds involved, so worked to put a stop to the practice – basically a legal amendment made to address a specific problem. But why was NALE introduced? What type of unfair advantage, or perceived rort, were SMSFs engaged in because some of their trustees could
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use their own personal skill to help them run their own superannuation fund? Was it a fear real estate agents were getting a leg-up in acquiring a property for their SMSF? Was it a concern financial advisers were getting a benefit from knowing how to construct an investment portfolio for their SMSF? Or was it a concern accountants were potentially getting a free administration service for their SMSF? Surely none of the scenarios mentioned above can justify the severity of the NALE legislation as it seems to be the epitome of using a sledgehammer to crack a walnut. Or have the new provisions been introduced with a more sinister motive of capturing additional government revenue, with one senior SMSF stakeholder believing this windfall might be as much as $30 billion. And as for the problems, we’ve only just scratched the surface. If, say, accountants have to charge their SMSF a commercial rate for an administration service they personally provide, what would be deemed an appropriate rate? Would it be based on the cheapest accounting fee available within a certain geographical radius or some other rate? After all, this situation does not present itself to having a ready-made yardstick like commercial interest rates for loans. This point alone would introduce additional complication to running an SMSF and additional work for the ATO in policing these rules – something of which the regulator is no doubt aware. Since the motivation for introducing NALE is not apparently obvious, the question must be asked if this is a situation where legislation is being introduced as a solution to a problem that doesn’t even exist. Thankfully the NALE consultation period is still alive, giving the sector hope the legislation will be changed to be more reasonable and practical.
Editor Darin Tyson-Chan darin.tyson-chan@bmarkmedia.com.au Senior journalist Jason Spits Journalists Zoe Paterson Tharshini Ashokan Sub-editor Taras Misko Head of sales and marketing David Robertson sales@bmarkmedia.com.au Publisher Benchmark Media info@bmarkmedia.com.au Design and production RedCloud Digital Printer Newstyle Printing 41 Manchester Street Mile End, SA 5031
WHAT’S ON
Super Sphere How to audit an SMSF VIC 3 March 2020 Crown Melbourne 8 Whiteman Street, Southbank NSW 12 March 2020 Sheraton on the Park 161 Elizabeth Street, Sydney QLD 20 March 2020 Sofitel Brisbane 249 Turbot Street, Brisbane WA 26 March 2020 Duxton Hotel 1 St Georges Terrace, Perth
DBA Lawyers Strategy Seminars TAS 11 March 2020 The Sebel Launceston 12-14 John Street, Launceston WA 13 March 2020 Mantra on Hay 201 Hay Street, East Perth NSW 17 March 2020 Quality Hotel Noah’s On the Beach Corner Shortland Esplanade and Zaara Street, Newcastle 18 March 2020 The Portside Centre – Symantec House Level 5, 207 Kent Street, Sydney QLD 19 March 2020 Christie Corporate Conference Centre 320 Adelaide Street, Brisbane
To have an upcoming event featured on the What’s On page, please contact darin.tyson-chan@bmarkmedia.com.au.
VIC 19 March 2020 The Savoy Hotel 630 Little Collins Street, Melbourne
WA 26 March 2020 Mercure Perth 10 Irwin Street, Perth
SA 7 May 2020 Sage Hotel Adelaide 208 South Terrace, Adelaide
QLD 31 March 2020 Sofitel Brisbane 249 Turbot Street, Brisbane
ACT 19 May 2020 Canberra Rex Hotel 150 Northbourne Avenue, Braddon
NSW 1 April 2020 Rydges Sydney Central 28 Albion Street, Surrey Hills
Institute of Public Accountants 2020 Victoria Congress VIC 5-6 March 2020 RACV Healesville 122 Healesville-Kinglake Road, Healesville
2020 WA Congress WA 12-13 March 2020 Optus Stadium 333 Victoria Park Drive, Burswood
SuperConcepts SMSF Specialist Course NSW 10-12 March 2020 SuperConcepts Level 17, 2 Chifley Square, Sydney VIC 17-19 March 2020 SuperConcepts Level 3, 530 Collins Street, Melbourne
Smarter SMSF SMSF Day
SA 7 April 2020 Adelaide TBA
SMSF Professionals Day 2020 Inquiries: Jenny Azores-David (02) 8973 3315 or email events@bmarkmedia.com.au
QLD 21 May 2020 Hilton Brisbane 190 Elizabeth Street, Brisbane SA 26 May 2020 The Playford 120 North Terrace, Adelaide VIC 28 May 2020 Pullman Melbourne on the Park 192 Wellington Parade, East Melbourne NSW 2 June 2020 Swissotel Sydney 66 Market Street, Sydney
VIC 24 March 2020 Rydges Melbourne 186 Exhibition Street, Melbourne
QUARTER I 2020
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