SMSF practitioners are not very comfortable with the idea of non-arm’s length income or NALI. This said, NALI can pan out rather well for the SMSF trustees and arguments can be given in favour of such a statement.
Equate NALI with your marginal tax rate
Take for instance, all those investors who are anyway paying the highest marginal tax rate. So, while one does not set out to pay 47% tax with a mindset towards NALI, it is fair to examine how things may differ at all if the percentage is nearly equivalent to your marginal tax rate.
NALI does not amount to a breach of Super compliance
NALI is not in breach with the Superannuation laws and is an income and not a contribution. The opposition bench can make a case for it being a contribution because it increases the overall wealth base as part of the capital but for now, it stands as income and not contribution. You can indulge in NALI but you can only do so after furnishing all the related disclosures.
ASIC’s advice guidelines
And there is one thing about the ASIC’s advice guideline released in July. In my opinion, it makes things a little complicated. In other words it is trying to use an adhesive for what is not broken in the first place. For probing into the generic risks of the SMSF, any investor can access the ATO guidelines. Any further additions can only make investment a greater puzzle than it is.
Absence of statutory compensation
Also, there is a general feeling that the absence of statutory compensation in the SMSF sector is a big cause for concern. Concern it certainly is but the issue is blown out of proportions for a sector that lacks prudential regulations. Yes, there is always the risk of unregulated financial products taking investors for a ride but with some diligence, such aspects can be taken care of.
Cash, term deposits and listed shares
After all, Australian banks are covering you for the cash and term deposits. Look their way, why go for the managed schemes unless you have the financial knowledge to avoid being scammed. Another case is the listed shares. SMSF clients cannot talk about statutory compensation figures in their case either because they can’t ascertain what percentage of drop in price of share can be put down to fraud and what to the normal movement in price dynamics of the market.
