ATO outlines tax return changes for SMSFs this year

The ATO has highlighted some of the new measures and changes to be aware of when completing tax returns for clients this year.

In an online update, the ATO provided an outline of some of the specific measures and support available for individuals impacted by COVID-19 as well as some changes specific to SMSF clients.

Updated SMSF instructions

The ATO said that the instructions for “Section A: SMSF auditor Part A” have been updated to help clarify the requirements for the fund. 

“This question can now be answered as ‘No’ if the audit report was qualified only in relation to insufficient audit evidence under Auditing Standard ASA 510 Initial Audit Engagements – Opening Balance,” the ATO explained.

Question 6D also no longer includes Part A qualifications, the ATO said. This question relates only to rectifying to Part B of the audit report.

A new label, J7 Property count, has been added to section H: Assets and liabilities at 15b.

“If your SMSF holds investments in real property that was held in trust as a security under a limited recourse borrowing arrangement, this information must be reported at J7 Property count,” the ATO explained.

Label G1 Death benefit increase at Section C, Deductions and non-deductible expenses has now been removed.

“If a fund member died on or before 30 June 2017, the fund must have paid the benefit before 1 July 2019 to be eligible to claim a deduction. From 1 July 2019, the deduction is no longer available,” the Tax Office stated.

NALI changes

The ATO reminded SMSF professionals that from 1 July 2018, NALI was expanded to also include income derived by an SMSF from a scheme in which the parties were not dealing with each other at arm’s length.

“This is where the fund incurred expenses (including nil expenses) in deriving the income that are less than those which the SMSF would otherwise have been expected to incur if the parties were dealing on an arm’s-length basis,” it explained.

“The expenses may be of a revenue or capital nature in the same way that NALI may be statutory or ordinary income.”

From 1 July 2018, income derived by an SMSF in the capacity of beneficiary of a trust through holding a fixed entitlement to the income of the trust will be NALI where both:

  • The SMSF acquired the entitlement under a scheme or the income was derived under a scheme in which parties weren’t dealing with each other at arm’s length.
  • The SMSF incurred expenses in acquiring the entitlement or deriving the income that are less than, including nil expenses, what the SMSF would otherwise have been expected to incur if the parties were dealing on an arm’s length basis.

Source: SMSF Adviser