One of the major concerns for taxpayers in taking on the role of a legal personal representative is that the Tax Commissioner may treat legal personal representatives (LPRs) as having a personal liability for a tax debt where assets of a deceased estate have been distributed and there is still outstanding amounts owed to the ATO.
In a recently released practical compliance guideline (PCG 2018/4), the ATO spells out when an LPR of smaller and less complex estates can be personally liable for tax debts. The PCG also provides a safe harbour arrangement to ensure the Tax Commissioner does not seek to recover the deceased’s outstanding tax liabilities from the LPR’s own assets. (Note however that there are some limitations on the PCG’s application, see below). […]
The legislation Treasury Laws Amendment (Tax Integrity and Other Measures) Bill 2018 has just recently passed both houses in Canberra, which among other measures also makes changes to the long-established small business CGT concessions.
The legislation’s explanatory memorandum (scroll down to page 13 of this PDF of the EM) spells out the incumbent basic conditions for the concessions to apply, but adds additional conditions that apply only where the CGT assets concerned are shares in a company or interests in a trust. (See schedule 2.6 of the EM, page 14.)
“We finally have some long-feared changes to the small business CGT concessions,” says tax policy specialist Ken Mansell, but adds that it is limited to certain assets only. “If it is not a share or a unit, there are no changes.” […]
The shake up that’s coming to Division 7A
Discussion about reforms to Division 7A has been bouncing back and forth between Treasury and the ATO for many years — since the end of 2012 in fact, giving the impression they may have been stonewalling any moves on Division 7A. But a definite crack appeared in that wall with the May 2016 Federal Budget. It was announced that “targeted amendments” were planned for two years hence from that date — in other words, 1 July 2018.
Well, as we know this time has come and gone. But just prior to that deadline (in May 2018, that is, the last budget), the timing of Div 7A reforms was pushed out once again, this time to July 2019.
But now, a paper has been released which spells out the intended Div 7A reforms, noting that the start date of 1 July 2019 remains unchanged. […]
You may or may not subscribe to the belief that Australia faces a change of government in the near future. The arguments for and against and the volume of discussions held over the barbecue are likely to ramp-up in the time between now and the next federal election, which must be held before the end of May next year.
However one contentious consideration that SMSF trustees may be well advised to give some strategic thought to is the Labor proposal to abolish the ability to cash in excess franking credits. Not only that, but now the government is holding its own inquiry into the idea (more below). […]
Inbound tour operators and collecting, and remitting, GST
A draft “practical compliance guideline” from the ATO deals with the requirement for “inbound tour operators” to collect and remit GST.
An inbound tour operator is an Australian entity that enters into agreements with non-residents to arrange the supply of Australian tour packages (that can include accommodation and non- accommodation components).
Whether GST is required to be remitted on these supplies depends on whether they are acting as an agent or principal. If they act as an agent of the non-resident, any commission charged to the non-resident will be GST-free as it is an export. If they act as principal, the entire supply (which includes mark-up or a profit margin) may be subject to GST as they are providing the service to be used in Australia. […]
At the end of 2017, an annual fee was introduced for dwellings owned by non-residents of Australia. The measure is part of the government’s housing affordability plan, and is also a financial incentive for foreign owners to make their dwelling available for rent and increase available housing in Australia.
Under the legislation, foreign owners of residential dwellings in Australia are required to pay an annual vacancy fee if their dwelling is not residentially occupied or rented out for more than 183 days (six months) in a year.
The “vacancy year” is not a calendar or financial year, but starts from when the owner first held their interest in the dwelling. The fee is paid by lodging a “vacancy fee return” with the ATO, which is required within 30 days after the end of the vacancy year. […]
The government has already announced, as part of the 2018-19 federal budget in May, that it will decrease the scope of allowable deductions for expenses stemming from holding vacant land that is intended to be used for residential or commercial purposes. The measure will apply from 1 July 2019. (See page 42 of the federal budget paper.)
The announcement was couched as an integrity measure to address concerns that deductions are being improperly claimed for expenses, such as interest costs, related to holding vacant land, especially where this land is not being “genuinely held” for the purpose of earning assessable income. It is also intended to reduce the tax incentives for “land banking”, which can limit the availability of land for housing or other developments. […]
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”. […]