We delve into the intricacies of nominating a superannuation beneficiary, examining the various types of nominations and the legal requirements they must meet.
Additionally, we tackle the complexity of tax residency in Australia. As the recent AAT case reveals, citizenship is not the sole determining factor; other elements, including double tax agreements, are pivotal to consider.
This edition also introduces you to the prospective Energy Incentive, offering a bonus tax deduction aimed at enhancing energy efficiency within your business.
Qualifying as an interdependent or financial dependant is another topic we explore, shedding light on how to ensure potential beneficiaries receive a death benefit.
Superannuation remains a cornerstone of financial planning for most Australians. In this issue, we provide you with a practical to-do list to make sure that your super is working optimally for you.
In this issue we also provide the latest values for goods taken for private use, and note that lesser or greater values may be used if you provide the evidence for your valuation.
We provide insights into how you can actually have two "main residences" for Capital Gains Tax purposes - but this is a complex area and there are many conditions which must be met.
We alert you to the ATO's more robust approach to tax debts, the particular areas on which they are focused, and ways in which you can in certain instances restructure your debt.
Lastly, we look at the taxation of superannuation death benefits. There is much you can do to ensure that your beneficiaries will not pay tax on your death benefits. A vital task is to ensure that your beneficiary is a "tax dependant" and we explain what this means.
Whether it be course and tuition fees, professional and trade journals, textbooks, airfares, accommodations or meals…there are potentially a wide range of expenses that may qualify as deductible for self-education purposes. However, there are key hurdles that must be cleared. First, the self-education must maintain or improve your current skills or knowledge. Alternatively, the self-education must lead to or be likely to lead to an increase in income from your current income-earning activities.
Meanwhile, it’s important for investors and other holders of CGT assets (such as rental properties, shares, land, units in a unit trust etc.) to have a general understanding of the 50% CGT discount. This discount allows a 50% discount on a capital gain where an asset is sold after being held for 12 months or more. Most entities (excepts companies and non-residents) are eligible. To meet the 12-month requirement you may wish to retain an asset for longer than you otherwise had planned.
Sometimes promoters of schemes target self-managed super funds (SMSFs). Schemes can include tax avoidance arrangements that inappropriately channel money or assets into your SMSF so you pay less tax. They may also include arrangements promoting the illegal early release of benefits from your fund for personal use. If you have been approached you should check the ASIC Financial Register to make sure the promoter has a financial licence.
For individuals, especially those nearing retirement or contemplating significant life changes, understanding the rules surrounding deductible contributions to superannuation funds is of paramount importance. The age-based rules and the work test are not just statutory requirements but pivotal elements that could substantially affect your retirement savings and tax liabilities.
Small business owners will find the section on Capital Gains Tax (CGT) Roll-over Concessions particularly enlightening. In an economic landscape where asset management and tax planning are integral to business sustainability, knowing how to strategically defer capital gains tax can offer a competitive edge.
Additionally, the Small Business Skills and Training Boost article is timely, given the ever-changing market dynamics and the increasing importance of employee development. This article aims to guide businesses on how to make the most of government incentives aimed at skills enhancement.
The issue also delves into retirement concessions related to capital gains, offering insights into how strategic financial planning can lead to significant tax benefits. If you are over 55 and considering liquidating assets or looking to channel gains into your super fund, this section provides valuable guidance.
July 1 saw an increase to the superannuation guarantee (SG) rate payable to employees and some contractors. While the increase from 10.5% to 11% may seem straightforward, there are complexities involved especially in the common case where the work to which superannuation was owed was performed in June but the employee was not paid for that work until July. There are other scenarios that are also complex. This piece also provides guidance on which amounts paid to workers attract SG, and how the SG rate will increase going forward.
The new financial year is traditionally a time that business owners review their operations, including the structure through which they operate. Broadly, there are four main types of structures – company, trust, sole trader and partnership. As your business grows, and your personal circumstances change it is prudent to review your structure. Factors that you should take into consideration in reviewing your structure include asset protection, legal tax minimisation, ability to admit other business partners, record-keeping and compliance burdens, and more.
Meanwhile the small business lodgment amnesty has now commenced. The amnesty was announced in the recent Budget. It applies to certain tax obligations that were originally due between 1 December 2019 and 28 February 2022 and runs from 1 June 2023 to 31 December 2023.
The recent ATO crackdown on trusts – involving section 100A where potentially the ATO may take an unfavourable view on what were previously understood to be legitimate distribution arrangements – may have some business owners posing the question of whether trusts are still worth it in terms of a useful business structure. However, asset protection, the availability of the 50% CGT discount, and legitimately minimising the trust income are all reasons why this structure remains appealing for business owners.
Meanwhile, for the first time, many Australians are finding themselves in a position where they are being told they owe the ATO money after completing their tax return this year. A significant number of taxpayers in this position are those that are still paying off their HECS/HELP debts – many of them young Australians. We look at some myths and facts around why this may be the case.
Higher interest rates are posing challenges for SMSFs. Funds with limited recourse borrowing arrangements (LRBAs) are now feeling the impact of 10 interest rate rises since May 2022 in one hit, from 1 July 2023. This could cause cashflow issues. At the same time, higher interest rates are tempting more funds to invest term deposits and the security they offer. However, trustees need ensure that such an investment aligns with their SMSF’s investment strategy and the risk settings of each member.
With the end of the financial year looming, the ATO has announced its three key focus areas for Tax Time 2023 – rental property deductions, work-related expenses, and capital gains tax (CGT). To maximise your claims in this area and protect yourself from ATO audits and adjustments, we inform readers of the type of records that the ATO will be looking for in the event that your claim is reviewed or audited. In particular, the new rules around work-from-home deductions require attention to detail when substantiating your claim.
With the total superannuation sector worth more than $3.5 trillion at the end of March 2023, superannuation is serious business. There are many types of superannuation funds available but sometimes having too many to choose from can be confusing. However, picking the right super fund is important as it could impact how much you may have to retire on in the future. This piece provides a brief summary of the five main types of funds and highlights the difference between each fund.
Meanwhile, it was confirmed in the federal budget that June is the final month for your business to take advantage of Temporary Full Expensing (TFE) on depreciating assets…but get in before 1 July! From that date forward, the write-off threshold will revert to $20,000 for small businesses (aggregated annual turnover of less than $10 million) and $1,000 for larger businesses. Most business assets are eligible, including machinery, tools, furniture, business equipment etc.
Not many people know that there is more than $16 billion in lost and unclaimed superannuation across Australia. This is an increase of $2.1 billion since the previous financial year. Lost super is superannuation money held by superannuation funds that people have lost touch with. You become a “lost member” and your superannuation becomes “lost” if you are: Uncontactable – the fund has lost contact with you and your account hasn’t received a contribution or rollover for at least 12 months or; Inactive – your account hasn’t received a contribution or rollover in the past five years. The good news is that finding lost or unclaimed super is easy, and can be done in a matter of minutes.
Do you operate your business via a family trust? If so, there is now slightly more clarity around the law on distributions after much uncertainty throughout the year, following the full Federal Court’s decision in the case of Commissioner of Taxation v Guardian. While the Commissioner may have been disappointed with the full Court’s finding that there was no reimbursement agreement, he would be quite pleased with the application of the anti-avoidance rules to the arrangement in question. What does this all mean for family trust distributions as we head towards the end of the financial year?
Meanwhile, a new ATO fact sheet shines more light on the FBT exemption for electric vehicles. Recently passed legislation exempts from FBT the private use, or availability for use, of cars to employees that are zero or low emissions vehicles with a value at first retail sale below the luxury car tax threshold for fuel efficient vehicles. This is aimed at making electric cars more affordable, thus encouraging a greater take-up of electric cars by Australian road users to reduce Australia’s carbon emissions from the transport sector. The new law applies to fringe benefits in this space provided on or after 1 July 2022.
Do you operate your business via a family trust? If so, there is good news on the tax distribution front. The ATO, via a decision impact statement, has now conceded that it will have to amend its position on trust distributions. In the Guardian appeal, the Full Federal Court rejected the ATO’s position reimbursement agreements and section 100A of the Tax Act. What does this all mean for family trust distributions as we head towards the end of the financial year? Moving forward, there are now a number of tax-effective strategies that can be employed that will not fall foul of the ATO’s interpretation in this area.
Are you an employer who needs to make superannuation guarantee (SG) contributions for your employees? If so, it may be worthwhile from a taxation standpoint to bring forward these SG contributions forward to before 1 July to benefit from a tax deduction this financial year. However, the timing of when SG contributions are deductible to an employer can be tricky if employers pay SG contributions for their employees via a superannuation clearing house (SCH). Employers can claim income tax deductions for April-June SG contributions made to a superannuation fund this financial year on behalf of their employees, subject to certain conditions being met.
Meanwhile, this could be the final opportunity for your business to take advantage of Temporary Full Expensing (TFE) on depreciating assets…but get in before 1 July! The principal benefit of TFE is cashflow. TFE enables businesses to bring forward their depreciation claims, and therefore their deductions upfront, into a single year rather than having them spread out over multiple future years. Ultimately, this assists cashflow which itself is one of the main challenges faced by businesses. Most business assets are eligible including machinery, tools, furniture, business equipment etc.
For those who have missed the deadline to obtain a director ID, you can still apply! However, an extension of time application form will need to be completed first.
Whether your side-hustle has crossed the line into a business, keeping good business records, and determining whether the personal services income rules apply to you…are just some of the issues that the ATO says will be on its radar as we head into 2023.
Many SMSF trustees wonder if they can live in their SMSF property once they retire. This is a common question particularly as property is such a popular SMSF investment. The answer is that the rules in this area are quite restrictive.
Cashflow is one of the leading causes of small business failure. To this end, a Cash Flow Forecast is a crucial cash management tool for operating your business effectively – tracking the sources and amounts of cash coming into and out of your business.
The eligibility age for downsizer contributions reduced from 1 January 2023. This means if you are age 55 or older, you could invest the proceeds of the sale of your family home to your superannuation outside of your standard contribution caps.
The ATO has finalised its new compliance guidance around the requirements for work-from-home deductions. The fixed rate method has now been revised. The revised method increases the claim from 52 cents to 67 cents per-hour. However, this rate now includes internet, phone, stationery and computer consumables. The record-keeping requirements under the revised fix rate method are now more onerous, also. You now need to keep a record of actual hours worked from home. The ATO will no longer accept estimates, or a four-week representative diary. This requirement is effective immediately (1 March).
Do you have an urgent medical or dental procedure to pay for? The ATO released a record $573 million in superannuation on compassionate grounds during 2021–22. While normally superannuation must be preserved for retirement, there are certain exceptions. One of these is compassionate grounds which among other things provides for a release of benefits for medical or dental treatment. Last year 9700 individuals applied for compassionate release of super for dental treatment expenses, and 82% were approved. There is no lifetime limit on the number of applications for release that you can make.
Meanwhile, with the end of the FBT year looming, car logbooks need to be in order for FBT purposes. Logbooks are valid for five FBT years (including the year the logbook is prepared), provided there is no significant change in the vehicle’s business use. Once the five-year period expires, a new logbook will need to be maintained if you wish to continue using the operating cost method. Therefore, if a logbook was last prepared in 2017/18, a new logbook is required for this FBT year (2022/23).