Meg Heffron

Key superannuation indicators highlighted a thriving SMSF sector that had established a firm foundation for strong growth, SMSF Association CEO Peter Burgess told delegates attending its National Conference Thought Leadership Breakfast in Melbourne yesterday.

“Establishment numbers are up, especially among younger people, the sector has passed the $1 trillion  milestone, and the latest research by the University of Adelaide shows SMSFs comfortably outperformed APRA-regulated funds in the five years to 30 June 2023.

“It’s not just the raw numbers, as encouraging as they are. Those traditional hallmarks of our sector, flexibility and control, are asserting themselves as evidenced by those nearing or in early retirement wanting a more tailored superannuation experience. In addition, technology is making it easier to set up and manage a fund, helping explain their growing appeal to a younger demographic.”

Burgess, who was joined on the Breakfast session panel by Heffron Managing Director Meg Heffron, Financial Advice Association Australia CEO Sarah Abood, and Stake CEO Jon Howie, were addressing the topic Momentum Matters: Sustaining success in the SMSF sector beyond $1 trillion. The session was hosted by Class and moderated by Class CEO Tim Steele.

Heffron said while establishment numbers were a good indicator of the sector’s heath, so too were wind-ups.

“A high wind-up rate for newly established funds suggests buyer remorse or scams. But the trend in recent years has been falling wind-up rates and the age of the fund at wind-up time has been getting older

“While it will be several years before we have reliable statistics because there’s always a lag regarding wind-ups but based on what the numbers are telling us now, they’re trending down despite the growth in funds.”

She concurred with Burgess on being positive about the sector’s ongoing growth, noting that most if it was coming directly from trustees.

“With advisers reluctant to recommend and accountants locked out, I suspect trustees are doing their own research and finding their own way to an SMSF.

“While I would always say that the best approach for an SMSF to optimise their superannuation is in partnership with an adviser, I don’t think we should underestimate the research some people do before concluding an SMSF is their best option and then bringing in an adviser at a later stage.”

Abood stressed the critical role that advisers played in the SMSF sector, with the first question being – does this retirement income structure suit the client?

“There are myriad issues to consider, ranging from the role of business real property, combining family assets, estate planning, and insurance.

“It’s also about capacity, for the adviser to assess whether the client has the skill, time, and desire to go down the SMSF path. Some advisers used to have a hard limit of $500,000 before advising a client to set up an SMSF, but that’s becoming less the case.”

Howie explained to delegates that investors are increasingly focused on ETFs when investing on the ASX, then looking to the U.S. when buying individual companies. “Ultimately, we don’t think that is healthy for the Australian economy, as some of our best companies  are being  tempted away from a local presence by larger and more vibrant markets overseas.”

“SMSFs are critical here, being one of the most important vehicles that many active, engaged retail investors tend to use These smaller investors are critical to ensuring healthy listed markets as the big APRA funds are increasingly unable or unwilling to allocate capital to smaller or newly listed companies due to their size,” he said.

Burgess and Heffron did not shy away from the fact the sector had its challenges.

“It would be wrong to assume everything is perfect in our world.,” Burgess said. “The number of disqualified trustees, although appearing to stabilise remains high, illegal early access remains a problem, and there are still too many instances of inappropriate SMSF advice as evidenced by the Compensation Scheme of Last Resort (CSLR) claims.”

“These are issues that can’t be resolved by the SMSF sector working alone. We’re now a significant and important part of the financial services industry, so all the industry, as well as Government and the regulators, need to work together to achieve the optimal outcome.”

Heffron floated the suggestion that perhaps the time had come for the sector to consider some modest barriers to entry or at least prompts to make people pause before setting up an SMSF – possibly via a form of education to encourage careful decision-making.

“But none of these issues detract from the fact our sector faces an exciting future. SMSFs always been at the forefront of developing new strategies, new ideas and that will continue. All those ideas eventually spill over into the other super sectors – and that’s got to be good for everyone.”

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The new appointments replace retiring directors, Liam Shorte, Dr Deborah Ralston and Bryan Ashenden.

SMSF Association Chair, Scott Hay-Bartlem, said: “Brett, Meg and Lachlan each bring unique perspectives from their many years in the industry, making them invaluable additions. We are delighted to have their industry knowledge and experience on the board as we strive to represent the industry and enhance the quality of SMSF advice.

Heffron, is an SMSF Association Fellow, SMSF Specialist Adviser, and Managing Director of Heffron Consulting with over two decades of experience in SMSFs.

A passionate advocate for education within the SMSF community, Heffron has been an active member of the SMSF Association for over 20 years, regularly speaking at the Association’s National Conference and professional development events.

Her long-standing commitment to the industry has been recognised, receiving the Association’s Chair Award in 2010 and the CEO Award in 2020.

Heffron said: “It’s a pleasure to join the Board of an organisation I have been involved with for many years, specifically contributing at a leadership level for the success and growth of the sector.”

Griffiths contributes over 25 years of experience spanning legislative compliance, retirement income streams and estate planning. He has worked for one of the largest superannuation consulting firms in Queensland and is currently a Director of Superannuation Advisory at Vincents.

Griffiths added: “I have always greatly valued the Association’s role in the superannuation and broader financial advisory sector, and I look forward to utilising my knowledge and contributing to the Association’s continued success.”

Sue’s diverse background in financial planning and taxation includes his current role as Partner and General Manager at Matrix Norwest. His technical expertise in SMSFs, coupled with a strong business acumen, means he is well positioned to contribute to the Association’s strategic direction.

Sue said: “I feel privileged at the opportunity to bring a fresh perspective to the Board and its mission of empowering Australians to manage their own superannuation. I’m particularly eager to highlight the importance of engaging with a younger demographic and ensuring the industry continues to evolve.”

Hay-Bartlem says: “The Association would like to thank the retiring Directors for their invaluable contributions to the Board. Their experience and dedication have greatly supported the growth and success of the Association.”

“In particular, I would like to thank and acknowledge Dr Deborah Ralston for her enormous contribution to the Association, which spanned two stints as director and one as Board chair. With over 25 years of board-level experience including roles on the Future Fund Board of Guardians and the RBA Payments System Board, her leadership has been invaluable. We are grateful for her lasting impact on both the Association and the financial services industry.”

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Meg Heffron

Self-managed super funds (SMSFs) should avoid knee-jerk reactions to the Government’s proposed tax on earnings on super balances exceeding $3 million, Heffron Consulting Managing Director Meg Heffron told the 2024 SMSF Association National Conference in Brisbane yesterday.

In her plenary address titled $3m super tax: Beyond the doom and gloom, Heffron said SMSF members should take a deep breath before taking any precipitous action if the proposed legislation becomes law.

“Although our impacted clients would prefer this new tax would disappear, it’s not a disaster and clients shouldn’t remove excess amounts from super without careful consideration.”

Heffron reminded her audience that getting to $3 million was much harder than it used to be. “Many clients will never get there and still see value in their SMSF, appreciating they are a genuine platform for their retirement savings strategy.

Looking at the Heffron client based, she noted that 43 per cent have less than $3 million and are over 65 – their peak savings years have passed.

“For those who opt to take their money out of superannuation, she cautioned that important issues to consider included the impact of large withdrawals on exempt current pension income (ECPI), not wasting losses and/or negative earnings, and any tax on death benefits.”

SMSF Association CEO Peter Burgess, in his plenary address titled Leading through change: SMSF legislative and technical update, told delegates that they could expect the $3 million cap to become law by 30 June this year.

“The only questions that remains is whether the Government’s proposal not to index the cap and to tax unrealised capital gains will survive the scrutiny of the Senate cross bench.

“Although there might not be sufficient cross bench support to block this Bill, we hope that they will support amendments which simplify and improve this tax.”

Burgess added indexation of the $3m cap could easily be added and the proposed calculation of earnings could be simplified, and the taxation of unrealised capital gains substantially removed, by replacing the proposed complex formula and system of carried forward negative earnings, with a rate which more closely resembles taxable earnings.

“Our modelling shows that if the 90-day bank bill rate was used to calculate earnings, over the medium to long term, not only would taxpayers pay substantially less tax, but their tax liability from one year to the next is much smoother and far less erratic than the Government’s proposed approach.

“Paying less tax was an outcome even if you choose a 15-year period over the past 30 years when there were successive years of negative returns – which under the Government’s proposed approach could be carried forward and used to offset the tax in a future year.”

“One of the biggest flaws with the Government’s proposed approach is the erratic and unpredictable nature of the tax – an outworking of the calculation which is linked to movements in investment markets.

“This unpredictability means members will need to maintain much higher cash balances from one year to the next – and ultimately this will have an adverse impact on their investment returns”.

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Tim Steele

The SMSF sector will put itself under the microscope at the Thought Leadership Breakfast (TLB) being held on the opening morning of this year’s SMSF Association’s National Conference at the Brisbane Convention & Exhibition Centre from 21-23 February.

An expert four-member panel will examine the challenges facing the sector that include the potential for more regulatory intervention and the growing attention that APRA-regulated funds are giving to the de-accumulation phase of superannuation and longevity risk.

Session moderator Class CEO Tim Steele will be joined by panel members: SMSF Association CEO Peter Burgess, Heffron Consulting Managing Director Meg Heffron, KPMG Partner Linda Elkins, and Brighter Super CEO Kate Farrar, as they hold up a mirror to the SMSF sector and examine where its strengths lie and where it needs to “level up”.

Burgess says the TLB has become an important forum for the sector to take a close look at long-term issues and trends confronting SMSFs and the wider superannuation system and this year’s event will be no different.

“Over the past decade, we have witnessed APRA funds experience significant change, often driven by government intervention, such as performance benchmarking, additional statutory reporting, compulsory member communications, and mandatory retirement support.

“This intervention, which has been designed to improve the system by protecting member benefits and enhancing their outcomes, has largely bypassed our sector.

“But the question we now ask is this all about to change, and, if so, how?

“In the past we have often been immune to the changes in the broader superannuation sector, but has this been a fool’s paradise that puts our sector at risk of being left behind?

“Do we need to be more open-minded when it comes to regulatory intervention, or do we remain wedded to the status quo that has served us well in the past, understanding that APRA funds are rapidly changing, particular as they focus more on the pension phase, an issue where we have long been the industry leader?”

Burgess says the Association has deliberately sought input into the debate from an APRA fund – a first for the TLB – in the form of the Queensland-based Brighter Super that has more than 250,000 members and about $30 billion in funds under management (FUM).

“Up till now APRA funds have focussed on the accumulation phase. But as they turn their attention to the de-accumulation phase – a space we have traditionally dominated – with the prospect of mandatory retirement support for members looming, will the tables turn?

“Certainly, hearing the views of Brighter Super’s Farrar on these issues should be necessary listening from all conference delegates,” he says.

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Mary Simmons

With all the conversations taking place around proposed changes to tax structures and the advancements in practice strategies, the SMSF sector is energised. It’s this bristling vibrancy that the SMSF Association is looking to ignite in its attendees at their 2024 National Conference, being held at the Brisbane Convention & Exhibition Centre from 21-23 February.

This year’s event will encourage all those working in the sector to embrace these professional opportunities and find new ways to Level Up. This overarching theme will be incorporated across the two and a half days, in technical sessions and workshops designed to elevate specialist superannuation advice and demonstrate how delegates can grow and excel professionally.

SMSF Association’s Head of Technical, Mary Simmons says: “The sector is constantly changing, as evidenced with the possibility of new tax on superannuation earnings exceeding $3 million, we need to ensure collectively that we are always learning to remain at the peak of our abilities, and at the forefront of the industry, so we are best equipped for these new conversations.”

“The SMSF Association’s national conferences have a long history of delivering high quality technical content and bringing together the brightest minds in the SMSF sector.”

“The networking opportunities and ability to share ideas and knowledge among industry peers adds significantly to the depth of learning and professional development.”

“Whether you’re advising clients just starting out in their working careers, clients closer to retirement or who have retired, the program delivers strategies for optimising superannuation contributions and planning for a secure retirement.”

As the new tax on super balances above $3 million becomes an inevitable reality, the Association’s national conference emerges as an essential platform to unravel the intricate details and the impact on the superannuation industry.

“In addition to Meg Heffron’s plenary address on how to address the “doom and gloom” narrative, we have a dedicated workshop to unpack the detail, and using case studies to focus on the nuances of the new tax landscape and how it interacts with elements such as the client’s total super balance and their transfer balance cap.”

“Addressing the needs of high-net-worth individuals, the program features sessions which provide detailed modelling and actionable insights about opportunities and a workshop on wealth management strategies to explore how alternative investment structures can seamlessly complement SMSFs”, Simmons says.

SMSF Association Chair, Scott Hay-Bartlem, will close out the conference with a keynote address on the ramifications that this new tax could have on beneficiaries and estate planning.

We’ve also planned sessions to address the critical need for contingency planning – from navigating the initial death of a member, valid enduring powers of attorney to exercising trustee discretion responsibly and how best to manage rogue trustees.

Given the prominence of direct property holdings in SMSFs, the conference program also offers a range of sessions to explore different ways to structure property ownership, as well as insights into handling complex situations ranging from related party transactions to managing Limited Recourse Borrowing Arrangements (LRBAs) in a rising interest rate environment.

“We also have a compelling series of practice management sessions designed to boost business acumen and operational effectiveness.”

“Sessions will explore the future of the industry with a focus on generational shifts and disruptive technologies including the transformative role of artificial intelligence.

The opening morning of the conference will feature a thought leadership breakfast hosted by Class on the topic of “Holding up the mirror – what the SMSF sector does well and where it needs to level up” followed by the traditional legislative update keynote address by Association CEO Peter Burgess.

Early bird registrations are now open. Following the overwhelming success and popularity of the workshops at previous national conferences, bookings for these are open and we expect the workshops at next year’s conference to reach capacity, so we encourage delegates to register early.

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Peter Burgess

There is no shortage of complex issues confronting SMSF specialists, from legislative changes, ATO rulings, the rising cost of living pressures to technological advancements such as ChatGPT, impacting on their businesses and clients.

With all these issues, and more, on the agenda at the SMSF Association’s highly anticipated Technical Summit, being held on July 26-27 on the Gold Coast, Association CEO Peter Burgess says it makes for a compelling argument for all SMSF specialists to attend.

“With the focus on ‘Advanced Professional Development’, it allows for industry experts to share their knowledge on how to respond to these challenges and the impact they have on their clients.

“We are thrilled with the line-up of speakers this year, with professionals seeking an understanding on how these changes will affect them.

“As a result, much of the program revolves around workshops that allows for an open, interactive conversation and for attendees to not only learn from highly reputable speakers but from one another.”

With the widespread negative ramifications of the Government’s proposed $3 million cap on super balances becoming increasingly clear, Burgess will use his opening address at the Summit to critically dissect this new tax and the recently released draft amendments to non-arm’s length expense rules.

Following this address, a keynote discussion from Heffron Consulting’s Meg Heffron will adopt a future planning perspective, exploring how the proposed $3 million cap on super is expected to affect the SMSF sector and members’ retirement savings.

Heffron will examine the potential impact the new tax will have on how SMSF members choose to contribute, invest their retirement savings and how they manage estate planning.

To assist in identifying which clients are likely to be affected by the $3 million super cap, DBA Lawyers Special Counsel Bryce Figot will deliver a workshop delving into core concepts such as Total Super Balance (TSB) and Transfer Balance Cap (TBC).

This highly technical workshop will address a myriad of interrelated issues, such as the indexation of thresholds, the impact of structured settlements and limited recourse borrowing arrangements plus much more.

Aligning with the overarching theme of thinking forward and future planning, Colonial First State’s Craig Day is set to close out day one with a case study driven workshop on the plethora of contribution opportunities available and the associated challenges.

The impressive line-up of keynote speakers on day two of the Summit includes View Legal’s Matthew Burgess who will use his learnings over the past 36 months as a case study to give actionable ideas and unpack the consequences of professional service firms (PSFs) harnessing the opportunities associated with AI enabled solutions, such as ChatGPT.

Cooper Partners’ Jemma Sanderson will open the afternoon with a focus on case studies on the different types of benefit payments and the importance of understanding how the super and tax laws interact.

Burgess concludes: “An area we have noticed members asking for is case studies and real-life examples on how to manage these changes in volatile times. As a result, many of the sessions not only include a presentation but case studies in alignment.

“In total six technical workshops, four keynotes and four technical sessions will be presented across the two-day Technical Summit, so we are excited with how this year’s agenda will challenge our industry experts and leaders.”

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Louise Biti

Specialist workshops will be a core focus at the upcoming 2023 annual SMSF Association Technical Summit, being held on July 26-27 on the Gold Coast.

SMSF Association CEO Peter Burgess says: “The outstanding success of last year’s event demonstrated the strong attraction that a combination of technical workshops, and engagement with industry experts presents for our specialist members.”

The 2023 workshop sessions are certain to have broad appeal with speakers including, DBA Lawyers’ Bryce Figot focussing on the tips and traps of the Total Super Balance and Transfer Balance Cap regimes, and Colonial First State’s Craig Day presenting his take on the latest in contribution strategies.

In other workshop sessions, Accurium’s Mark Ellem will dive into a series of case studies designed to explore the technical issues that can arise during the preparation of annual financial statements, while Aged Care Steps’ Louise Biti will look at aged care and housing affordability solutions.

In his keynote address opening the Summit, Burgess will provide expert analysis and critical review of Treasury consultation papers (including the proposed $3 million cap), ATO rulings, enacted law and draft legislation impacting on the SMSF sector and the broader super industry.

Heffron Consulting Meg Heffron’s keynote address in the morning on day one, looks at the $3 million cap, with Heffron adding: “Although not all SMSF clients will be subject to the new tax on earnings for balances over $3 million, it is clearly a major issue for our industry. 

“I will explore some of the new challenges and decisions for impacted clients, advisers and accountants whilst also discussing what this means for the future place of SMSFs in our superannuation landscape.”

The Chair of the SMSF Association, Scott Hay-Bartlem from Cooper Grace Ward will wrap up the 2023 Technical Summit with a high energy estate planning update, sharing his predictions on future litigation ‘hot spots’, as well as previewing how the proposed $3 million cap is expected to impact on future estate planning strategies.

Burgess concludes: “It all adds up to an exciting and professionally fulfilling event. The Technical Summit always presents an advanced agenda to elevate the skills of those operating at the highest level in the SMSF sector, and this year is no different. 

“The bonus alongside the several industry leaders we have presenting will be a gala dinner to celebrate the Association’s 20^th anniversary on the Wednesday night.” 

With six technical workshops on the program to ensure high quality discussions, seats at this year’s Technical Summit will be limited, so delegates are encouraged to register early.

Register for the Summit. 

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Dr Irene Guiamatsia

The long-term outlook for self-managed super funds (SMSFs) is promising and exciting as an increasing number of younger people want to take control of their personal finances, the SMSF Association Thought Leadership Breakfast heard at its National Conference Yesterday.

The five-member panel, dissecting the topic How big can the SMSF sector BE? moderated by Class CEO Tim Steele, offered myriad reasons for the sector’s continuing growth, including individuals wanting to take personal control over their finances, asset allocation, and supply-side factors.

Investment Trends Head of Research, Dr Irene Guiamatsia, said: “Although the average age of SMSF members remains high at around 60 years of age, SMSFs are being established at a younger age, boding well for long-term growth.

“For this cohort, the main driver for growth remains the desire for control. Early exposure of Millennials and Gen Z to digitally delivered financial services reinforces control as an important component of their engagement with service providers. Also, Australians’ well-documented bias towards direct property as an asset class, and their desire to access it, helps stoke SMSF establishments.

“Supply side factors, such as low-cost initial setup, greater synergies between accountants and adviser practices and a slightly softer regulatory posture also play their role.”

Heffron Consulting Managing Director, Meg Heffron, said younger people will end up with larger balances at the same life stage than older generations and are more engaged – so the fact that SMSFs are perfectly suited to be someone’s ‘platform for life’ makes them well positioned for the future.

“And a strong SMSF sector is actually important for the whole super system.  SMSFs drive innovation that eventually trickles through to the broader superannuation space.  We only have to look at the great improvements retail funds have made when it comes to offering investment choices to see how competitive pressure from SMSFs improves super choices for everyone.”

SMSF Association Deputy CEO/Director of Policy & Education, Peter Burgess, said Association-commissioned research by the actuarial firm Rice Warner into costs, and the University of Adelaide into performance, have demonstrated the sector’s competitiveness on reaching the critical mass of $200,000 and this will hopefully be a key driver of growth.

“This research is already having an impact with ASIC releasing updated SMSF Advice materials late last year removing references to $500,000 as being the minimum recommended balance to start an SMSF.

“Ensuring SMSF members do the right thing is critically important and having access to quality SMSF advice is a big part of that.

“If we get this right the sector can achieve its full potential, but if we get it wrong we may see restrictions and conditions imposed that could stifle the growth of the sector.”

On the issue of whether a growing SMSF sector will be vulnerable, Professor Hazel Bateman of the University of NSW’s Business School of Risk & Actuarial Studies noted that financial literacy is poor across the entire population and that it declines at older ages. “Yet people tend to be over-confident of their abilities, with the data from the nationally representative HILDA (survey showing that self-perceived financial capability increases with age.

“Behavioural biases are also important. Procrastination might lead to some not adequately managing the SMSF they have established or using inappropriate metrics to measure its performance.

“Ensuring that SMSF members have access to appropriate advice is very important. It is important that the advice is good quality – related academic research shows how people are vulnerable to ‘first impressions’ and ‘confirmation bias’ and may stick with ‘ineffective advisers’.”

Steele concluded: “Today’s panel discussion and audience engagement demonstrates a sense of collaboration among industry participants to help shape the future of the SMSF industry and improve the retirement outcomes for more Australians.

“As an industry participant, Class will continue to innovate and invest in technology solutions that enhance business efficiencies, scalability and create value.”

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Meg Heffron

Heffron’s Super Toolkit now includes BGL integration and multiple subscription levels. Drawing on our extensive technical knowledge and understanding of SMSFs, Heffron is creating tools for SMSF professionals which contain unique features to guide users through the process of creating fully compliant SMSF documentation.

As part of our latest release we have added a Professional subscription level to our Toolkit offer. Subscribers can now manage access for multiple users from within a firm to collaborate in a single account. They will still be able to share documents with interested parties outside their organisation, like trustees or financial advisers.

Another feature of the Professional subscription is integration with innovative and award winning SMSF software provider BGL 360. This technology will allow client details to be populated in the documentation as it is created, creating business efficiencies.

Heffron’s Managing Director Meg Heffron announced the newly developed features.

“We are excited about the next evolution of our Super Toolkit. Our intention is to provide tools that enable intermediaries and trustees to play the role they want to play with SMSFs. For some this might simply be providing a compliance document. For others, it will be guiding them through the key decision points for a range of different SMSF events or activities (we’re calling this “guided decision making”).”

“The BGL integration is something we are extremely proud of. This will save our clients time by allowing fund and member data to be automatically pre-populated from BGL 360.”

“We will continue to develop useful tools to help our clients with many aspects of their SMSF work,” said Heffron.

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Meg Heffron

A key ATO ruling (LCR 2021/2) was released yesterday to update the original draft from 2019. It deals with the vexed issue of when transactions between a superannuation fund and another party potentially create non arm’s length expenses (NALE).

NALE exists when expenses incurred by a SMSF are too low – they are less than the amount that would be been incurred if the parties had been dealing with each other on an arm’s length basis.

Meg Heffron, Managing Director of Heffron and leading SMSF expert explains that NALE is bad because where it exists, the fund also has NALI (non arm’s length income).

“In other words, if a fund’s costs are artificially low, some or all of its income is taxed at the top marginal tax rate of 45% rather than the normal superannuation rates of 15% or nil%” said Heffron.

“The ATO has consulted widely and has ended up in a place that won’t please a lot of us on every front.” Like the original draft, the final ruling divides potential NALE into two buckets:

• Costs that relate specifically to an individual asset – in which case all future income in relation to that asset is tainted forever and will be NALI (including capital gains), and
• Costs which don’t relate to an individual asset (let’s call them general expenses) and are therefore deemed to relate to all income of the fund – in which case NALE means ALL fund income is NALI.

For SMSFs in particular, when it comes to trustees doing work for their own fund, the final ruling also draws a distinction between:

• Work done in the person’s individual capacity – which might create a NALE problem if the fund isn’t charged arm’s length rates, vs
• Work done in their trustee capacity – where it’s generally OK not to charge for the work, since being a trustee naturally involves (unpaid) work and sometimes that work will leverage particular skills the trustee happens to have. In fact, the super law prohibits trustees being remunerated for the work they do as trustee.

Heffron explains that the final ruling includes a sensible compromise that where a general cost is recurring, having a NALE problem in one year won’t taint the relevant income forever. General costs will only give rise to NALI in the years in which they are charged on a non arm’s length basis.

“In practical terms, this means that undercharging accounting fees in one year (a general expense that causes all fund income to be NALI) will only impact that year” says Heffron.

Note that the ruling explicitly distinguishes between this type of “once off NALE” and a similar problem where the expense relates to the purchase of an asset. Unfortunately, there is a permanent problem for NALE under these circumstances. The ruling even provides an explicit example where an LRBA is entered into on non arm’s length terms. Even refinancing and moving to arm’s length terms doesn’t help – all income and capital gains, now and forever, will be NALI.

“That’s rough. It means there is actually no solution for LRBAs that aren’t set up on a solid market basis” says Heffron.

A second piece of good news is that the very tough stance originally taken on (most commonly) accountants doing work for their own SMSFs using company equipment has been softened to include some important new language: “However, minor, infrequent or irregular use of equipment or assets will not, of itself, indicate the individual is acting in their individual capacity. For example, in the absence of any other factor indicating otherwise, minor, infrequent or irregular use of a business computer at the office by an individual would not, of itself, indicate the individual is acting in their individual capacity” LCR 2021/2.

Heffron says there are still plenty of questions to answer in regard to this subject.

“The importance of relying on a licence or insurance – it would seem that (for example) it’s fine for a qualified accountant to do their SMSF’s bookwork on their work computer and using their expertise gained via their work. But if they also lodged their tax return under their firm’s corporate tax agency, that is likely to create a problem,” says Heffron.

“A similar issue would appear to arise for financial advisers. An example provided in the ruling (Example 7, Levi) makes it clear that it’s fine for Levi to place investments for his SMSF (even using his work computer). But we’re unclear as to how far that stretches. If Levi’s SMSF is invested via the same platform as all Levi’s other clients, can he manage it under the same dealer code?”

“And finally, the ruling does acknowledge the commercial reality of things like staff discounts. It provides examples about situations where (say) accounting fees for work on SMSFs of the staff who work at the firm can be discounted without automatically creating NALE. A key feature of the examples provided, however, is that the trustee / member is not in a position to influence the discount. How far does this go? Could we be in the bizarre situation where I can offer all Heffron staff a discount on their SMSF work but can’t receive one myself because I can influence the decision? It’s not clear.”

Meg Heffron explains that there is still much to decipher and consider from this ruling.

“It’s a good start but as always, we need more examples that are closer to real life. We have specific time devoted to this important topic in our forthcoming Super Intensive Day as we predict there are many nuances that will need to be nutted out before SMSF practitioners and advisers feel they have this under control. “

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