Non-arm’s length income from trusts and SMSFs

Non-arm’s length income from trusts and SMSFs


The ATO is reminding self-managed super funds (SMSFs) of the rules regarding non-arm’s length income from trusts.

The non-arm’s length income rules can apply to investments, transactions and other arrangements undertaken by SMSFs when the terms of the relevant investment, transaction or arrangement are uncommercial in nature.

If income is distributed from a discretionary to a SMSF beneficiary, it is:

  • automatically deemed non-arm’s length income of the SMSF (regardless of the nature of the dealings of the relevant parties)
  • taxable at the highest marginal tax rate.

Income received by a SMSF that is a fixed entitlement to trust income is also non-arm’s length income if it is:

  • income from a scheme where the parties were not dealing with each other at arm’s length
  • more than the SMSF might have expected to derive if the parties were dealing with each other at arm’s length.

If you are unsure whether income from trusts is considered arm’s length income, contact our office.

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If you believe the matters discussed above are relevant to your business, please contact Darren Smith of our office to discuss further.


Darren is a Chartered Accountant with extensive experience, including working in the big 4 and medium sized firms before becoming a partner of a city based firm in 2000.

He has gained much experience and has extensive knowledge in providing business and taxation advice, superannuation planning, negotiation of sales and acquisitions of businesses and property development. His client base covers a wide range of industry groups.

Darren works with business owners to grow their businesses and create personal wealth within and outside of their business.


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