Client results

BPFN
BPFN v Commissioner of Taxation

Recently, David Hughes and Adria Askin in our Tax team obtained a successful outcome in proceedings before the Administrative Appeals Tribunal, BPFN v Commissioner of Taxation [2023] AATA 2330.

This case has garnered attention, particularly amongst those who are interested in self-managed super funds (SMSFs) and dealings with related parties.

This was a difficult matter which covered issues of law regarding the non-arm’s length income (NALI) provisions per section 295-550(5) ITAA97 and a factual scenario that had not previously been litigated. The case involved a series of loans made from a SMSF through related entities and ultimately to unrelated third parties. Under the loan agreements, the interest that was paid by the unrelated third party was returned to the SMSF, and the two related intermediary entities were paid arm’s length fees for their involvement in the loan agreements.

The Commissioner raised novel arguments with respect to the application of the NALI provisions, each of which were addressed through the proceedings.

This successful outcome again reinforces the importance of high quality evidence, which in this matter supported the Deputy President’s finding that the terms of the loan agreements were consistent with arm’s length dealings.

This decision provides much needed guidance to SMSF trustees and their advisers on the interpretation and application of the NALI provisions, in circumstances where we have seen an increase of ATO compliance activity regarding superannuation funds and their dealings.