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Australia Consults On Superannuation Tax Reforms

Friday, January 12, 2018

The Australian Government is consulting on two measures designed to strengthen the superannuation tax rules.

The consultation covers proposals that were previously announced in the 2017-18 Budget.

The first measure includes a member's share of the outstanding balance of a Limited Resource Borrowing Arrangement (LRBA) in their total superannuation balance (TSB). Under the current rules, the liability under a LRBA reduces a member's TSB by reducing the amount available for commutation or withdrawal. The new measure will cancel out this effect.

The second measure ensures that non-arm's length expenditure is taken into account when determining whether the non-arm's length income (NALI) taxation rules apply to a transaction. The change is intended to deny concessional tax treatment to income derived from a non-arm's length arrangement where fund expenditure is set below-market rates.

The aim of both measures is to ensure that LRBAs or related party transactions cannot be used to circumvent superannuation contribution caps. The Government said the changes are not intended to prevent the use of LRBAs.

The consultation will close on 9 February.