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Regulatory Roundup – September 2018

Could trust splitting soon result in increased tax obligations?
A draft taxation determination released recently has triggered some alarm among trustees that certain previously benign trust re-arrangements may soon lead to new tax obligations being attached.

TD 2018/D3 posits that certain trust split arrangements should be viewed as the creation of a new trust over some, but not all, of the assets held by the original trust. The result, as set out in the TD, would be to trigger CGT event E1.

While the draft determination allows that there are many forms of arrangement that can be described as a “trust split”, it says that for the purposes of the change to the rules, this refers to an arrangement “where the parties to an existing trust functionally split the operation of the trust so that some trust assets are controlled by and held for the benefit of one class of beneficiaries, and other trust assets are controlled and held for the benefit of others”. […]

Tax rates for deceased estates

The tax rates that apply to income a deceased estate declares depend on the period of time after the person’s death.

First three income years

For the first three income years, the deceased estate income is taxed at individual income tax rates, with the benefit of the full tax-free threshold, but without the tax offsets (concessional rebates), such as the low-income tax offset. No Medicare levy is payable.

You cannot extend this concessional period of three tax years. […]

Regulatory Roundup – August 2018

 
Vehicle’s ‘private use’ for FBT gets some wriggle room — up to a point
The ATO has made a change to the FBT rules, set to take affect for the 2019 FBT year and beyond, that will give businesses that supply employees with motor vehicles (that are not cars) a prescriptive method to apply to get an exemption to FBT. It is a change from the objective test that has been in place.

Generally, a fringe benefit arises where an employer makes a vehicle they hold available for the private use of an employee. Under the car-related exemptions of the FBT rules, a fringe benefit is an exempt benefit where the private use of vehicles is limited to work-related travel and other private use that is “minor, infrequent and irregular”.

The ATO’s practical compliance guideline on the matter says there has been demonstrated inconsistency in the application of exemptions, leading to additional compliance costs, especially where private travel is relatively low.

“To reduce these compliance costs and provide certainty, this draft guideline explains when the Commissioner will not apply compliance resources to determine if private use of the vehicle was limited for the purposes of the car-related exemptions,” the PCG says. […]

Transfer balance account report (TBAR) update

The ATO requires SMSF trustees to use the superannuation transfer balance account report (TBAR) to advise it when a transfer balance account event occurs. It uses this information to adjust a fund member’s transfer balance account so it can correctly apply the transfer balance cap provisions.

SMSF trustees are required to report the following events:

super income streams in existence just before 1 July 2017
any of the following events that occur on or after 1 July 2017

super income streams that have commenced in retirement phase
limited recourse borrowing arrangement payments
member commutations
compliance with a commutation authority issued by the Commissioner
personal injury (structured settlement) contributions
super income streams that stop being in the retirement phase, for example because the trustee failed to meet the minimum pension payment standards for an income stream.

[…]

Regulatory Roundup – July 2018

Tax Time toolkit

The ATO been working with a small, diverse group of tax agents to develop a suite of resources for you and your clients this tax time. The Tax Time Toolkit includes information about car expenses, clothing and laundry, working from home, self-education and much more. See what’s available here. […]

Your car expenses claims to get the blowtorch treatment this tax time

Your car expenses claims to get the blowtorch treatment this tax time

Assistant Commissioner Kath Anderson has announced that the ATO is particularly concerned about taxpayers either making mistakes or deliberately lodging false claims in relation to work-related car expenses over tax time 2018.

“Last year around 3.5 million people made a work-related car expense claims, and together they totalled about $8.8 billion,” Anderson says. “Now that’s a lot of money — and Australians expect us to make sure that people are doing the right thing and not over claiming.” […]

Home to work travel claims?

Home to work travel claims? Generally not, but sometimes…

As a general rule, travel from your home to your workplace is not allowed as a deduction because it constitutes a “private expense”. There are however specific situations where this rule may not apply, and there can be circumstances where you may be entitled to claim some of the travel expenses between your home and your regular workplace, or even your alternative workplace.

But it is a minefield that needs to be treaded carefully so as to not end up in hot water with the taxman. […]

Regulatory Roundup – June 2018

Small business concessions under the spotlight
The CGT concessions for small business are important for qualifying businesses in that they can defer, reduce or remove liability to CGT.

The government announced last year that it intended to tighten the eligibility factors for the CGT concessions that are generally available to small businesses, and it has just initiated the formal review of the concessions.

Chaired by Dr Mark Pizzacalla from the Board of Taxation, the review is being conducted independently and is “self-initiated”. Dubbed a “consultation guide”, the Board of Taxation says it will draw on previous work it has undertaken into small business tax, other similar work undertaken by Treasury, as well as international experiences. (Get a copy of the guide here.)

In addition, a reference group of small business, professional and academic stakeholders have also generously volunteered their time and expertise to assist Dr Pizzacalla with his review. The results of the consultation process should be available by the end of October this year. […]

Asset Valuations and the Contribution Caps

SMSF asset valuations and the contribution caps

Asset valuations and the contribution caps are both contentious issues, with many SMSFs failing to regularly update their asset valuations and some auditors turning a blind eye. And SMSF auditors who do the wrong thing in relation to valuations may also find themselves facing action by ASIC.

The new contribution caps require that assets of the fund, as at 30 June 2017, must be properly valued to determine the fund’s total asset value.

If assets are overvalued this may tip a member over their cap, and if the ATO considers the assets have been deliberately undervalued to keep a member under the cap, then it has the power to take a range of penalty actions.

Generally speaking, assets do not need to be valued by a qualified independent valuer except as indicated below — however this does not mean the trustees cannot just determine any value they like. It must reflect a fair market value of the asset at the time of the valuation, and documentation as to how the valuation was determined should be kept by the fund, so it can provide this to its auditor as well as to the ATO should it seek proof of how valuations were determined. […]

Company directors

Company directors: Do you REALLY know your responsibilities?

As though business owners and principals don’t already have enough on their minds, discussion about the ups and downs of the business environment is being heard around the barbecue again — just to add to the list of excuses for not sleeping well at night.

Company directors especially need to keep in mind that the Corporations Act holds directors personally liable for many of the legal and financial obligations expected from a company (see the relevant section of the law here).

As anyone running a business knows, commercial decisions must be made, and many times these decisions involve some degree of risk. While the distinction between entrepreneurial freedom and delinquent corporate behaviour will be clear cut for most company directors, there are nevertheless circumstances where these lines can blur, resulting in sometimes substantial (and sometimes unexpected) personal exposure. […]