Bills introduced for changes to LRBAs, NALI, SG opt-out and Salary Sacrifice

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The Government has moved to legislate several of its integrity measures around superannuation, introducing Bills for Super Guarantee opt-out, including LRBAs in Total Super Balance, Non-arm’s length income for expenses and to close the Salary Sacrifice ‘loophole’.

Each of these measures, some of which date from 2017, have previously been put before the Parliament – though the Bills lapsed with the Federal Election.

Three of these measures are included in the Treasury Laws Amendment (2018 Superannuation Measures No. 1) Bill 2019, which was introduced to the House of Representatives.

Include LRBAs in Total Super Balance

This measure would mean that in some circumstances the outstanding balance of a Limited Recourse Borrowing Arrangement (LRBA) would be included in the calculation of member’s Total Superannuation Balance (TSB).

As currently drafted, this would not apply to LRBAs commenced prior to 1 July 2018. Also, including the LRBA balance in a member’s TSB only applies to members who have satisfied a condition of release with a nil cashing restriction, or LRBAs involving an “associate” – related party borrowings.

This change was announced in May 2017, in the 2017/18 Budget.

Super Guarantee opt-out

Under this proposed measure, from the 2018/19 Budget, employees on high incomes with multiple employers would be able to opt out of receiving Super Guarantee contributions from some employers – so they don’t breach the concessional contributions caps.

There are limits on the Superannuation Guarantee which prevent an employee exceeding the concessional contributions cap, but employees with multiple employers could breach the caps based solely on their SG contributions.

The Bill has this measure applying from 1 July 2018 if it passes. Though it appears this date has carried over from a previous Bill which was put before Parliament in May 2018 and lapsed with the election.

Non-arm’s length income from non-arm’s length expenses

This change removes ambiguity in the legislation, so that it is clear that non-arm’s length expenses incurred by SMSFs in earning assessable income make that income Non-arm’s length income (NALI) – dramatically increasing the tax payable on the income.

The explanatory material for the Bill include an example of an SMSF that buys a commercial property under a LRBA for the full purchase price, for no interest, and no repayments for 25 years.

“The SMSF has not incurred expenses that it might have been expected to incur in an arm’s length dealing in deriving the rental income. As such, the income that it derived from the non-arm’s length scheme is non-arm’s length income,” says the Explanatory Memorandum.

This change was first announced in the 2017/18 Budget.

Salary Sacrifice ‘loophole’

The Government has also reintroduced a measure to close the so-called ‘loophole’ around Salary Sacrifice – which allows employers to claim the salary sacrificed contributions of employees against the Super Guarantee obligations of the employer.

This change is included in the Treasury Laws Amendment (2019 Tax Integrity and Other Measures No. 1) Bill 2019, which also includes other tax change.

This Salary Sacrifice change was announced in July 2017, however the Bill it was in stalled in the Senate and lapsed with the election. While the Salary Sacrifice change likely has bipartisan support, the Government included it in the same Bill as the more contentious expansion of super choice.

Current superannuation legislation

Status of current superannuation Bills

Last updated: 30/09/2020.

Lapsed superannuation legislation

Lapsed superannuation legislation

The following Bill lapsed with the Federal Election, and would need to be reintroduced to proceed.

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