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Is an ASIC fee paid by a member for an SMSF corporate trustee a contribution or NALE?

NALI –– unit trusts and draft LCR 2019/D3


Where an SMSF member or related party pays the annual ASIC fee for a corporate trustee, this may give rise to non-arm’s length expense (NALE) risk that can result in non-arm’s length income (NALI).

A NALE risk can also arise where a corporate trustee also acts in any other capacity (eg, carrying on a business in its own right) if a suitable proportion of the ASIC fee is not paid by the fund.

These risks arise as a lower, or nil, expense is paid by an SMSF that relates to a non-arm’s length arrangement (ie, NALE).

Proposed legislative (NALE) changes

There is proposed amending legislative changes impacting NALE. Exposure Draft ‘Treasury Laws Amendment (Measures for Consultation) Bill 2023: Non-arm’s Length Expense Rules for Superannuation Funds’ (Draft NALE Bill) issued on 19 June 2023 and submissions closed on 7 July 2023. We await the legislation that will implement these proposed changes.

ATO material

The NALE risks relating to an expense payment on behalf of an SMSF are reflected in Law Companion Ruling (LCR) 2021/2. This is despite the previously long-established practice in ATO ruling TR 2010/1 that an expense paid on behalf of a fund should be treated as a contribution. The following is an extract of paragraphs [172] to [174] from the ATO ruling TR 2010/1 – Income tax: superannuation contributions:

  Payment of fund expense

    1. The Commissioner recognises that it has become common within some parts of the superannuation industry for a person to pay an expense on behalf of a superannuation fund. This will usually involve an employer or member of the fund. The practice involves making journal entries after the expense is paid that, in the case of the employer or fund member, re-classifies the expense payment as a superannuation contribution and, in the accounts of the superannuation provider, recognises the making of the contribution and payment of the expense.
    1. The Commissioner’s preferred approach is for all superannuation fund expenses to be paid directly out of the fund itself and for superannuation contributions to be made directly to the fund. This provides clarity because the outgoings of, for example, an employer or member of a fund, and the fund directly match the tax treatment.
    1. Where a person pays an amount to a third party to satisfy a liability of a superannuation provider, the superannuation provider is taken to have constructively received the payment made to the third party on the superannuation provider’s behalf. The payment to the third party increases the capital of the fund because the person’s payment of the superannuation provider’s expense extinguishes the liability of the provider.

Thus, according to TR 2010/1 as it currently stands, if a member pays the entire ASIC fee of a corporate trustee, the ATO generally treats the expense paid on behalf of a fund as a contribution. The amendments proposed to TR 2010/1-DC do not provide clarity on whether the annual ASIC fee (or similar expense) would be considered a contribution or NALE in circumstances where it is paid for entirely by a related party. The revised draft of TR 2010/1-DC) is likely to remain in draft form until the draft NALE legislation is finalised.

In LCR 2021/2 there are various comments contrary to this contribution position which indicate that the payment of a general expense like an ASIC fee ‘will have a sufficient nexus to all of the ordinary and/or statutory income derived by the fund’ and that this could be a ‘recurrent expenditure’ that causes NALE issues for the relevant income year(s) of the expense.

There is therefore no clear guidance or divide between what is considered a contribution and what is considered NALE. Hopefully, clarification will be reflected in the legislation that implements any NALE changes.

The Draft NALE Bill does however clarify that contributions that are included in the entity’s assessable income under Subdivision 295-C of the Income Tax Assessment Act 1997 (Cth) for an income year will not be subject to NALI. Thus, concessional contributions will be excluded from NALI.

Assuming the Draft NALE Bill becomes law, if an SMSF incurs a NALE (eg, a lower expense) that invokes NALI, the fund should only be taxed at 45% on two times the difference between the arm’s length expense and what was paid. The annual ASIC review fee for an SMSF would generally be an expense of a revenue nature (as compared to a capital expense) and therefore should qualify for the proposed two times cap.

Allocation of the ASIC fee

The next question is – what is an appropriate arm’s length allocation of the ASIC fee where the company acts as the SMSF trustee and also in another capacity? (Naturally, this issue would be resolved if the SMSF had a sole purpose corporate trustee but many do not).

While the prudent approach would be for the SMSF to contribute towards the cost of the ASIC fee, it raises questions around the appropriate allocation of the fee that the SMSF should pay for.

For the financial year ending 30 June 2024, the annual ASIC fee for a special purpose company is $63 (where the company acts solely as an SMSF trustee and includes special provisions in its constitution). In contrast, the fee for a normal proprietary company is $310.

Several approaches to deciding what is an appropriate allocation might include:

  • allocating $63 to the SMSF while the remaining $247 is allocated and paid for by the family trust or the company;
  • the fee could be split on a 50/50 basis if the company has two roles (as the discounted AISC fee does not apply given the company is not acting as a sole purpose SMSF trustee);
  • allocating a proportion of the fee on a reasonable basis (eg, the basis of assets or turn-over of the SMSF compared to the company); or
  • not allocating anything to the SMSF as it is a trustee expense that arguably does not need to be allocated towards the fund.

Advisers and auditors may have to spend considerable time deciding how to deal with these type of issues even though they involve immaterial amounts given there is no ‘de minimis’ threshold for NALI.


As you will see from the above analysis of what is seemingly a simple question, NALE is complicated and will give rise to additional work and costs. Until a legislative fix is finalised, the divide between what is a contribution and what is NALE remains uncertain. Once a legislative fix is made, a review of any ATO’s revised material will also be needed.

Moving forward, SMSF trustees and advisers need to minimise NALI/E risks and collect appropriate supporting benchmark evidence in relation to all related party dealings.

Related articles:

 NALI Advice

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This article is for general information only and should not be relied upon without first seeking advice from an appropriately qualified professional. The above does not constitute financial product advice. Financial product advice can only be obtained from a licenced financial adviser under the Corporations Act 2000 (Cth).

Note: DBA Lawyers presents monthly online SMSF training. For more details or to register, visit or call 03 9092 9400.

For more information regarding how DBA Lawyers can assist in your SMSF practice, visit

By Daniel Butler ([email protected]), Director, and Shaun Backhaus ([email protected]), Senior Associate, DBA Lawyers


27 July 2023

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