News & Tax Insights

A change to the Tax Act purportedly to allow streaming of capital gains and franked dividends became law at the end of June this year. The practical implication of the new law is that trust distribution minutes generally need to be finalised by 30 June to effectively stream franked dividends from discretionary trusts. Over the last 18 months there have been 2 significant cases about interpretation of tax laws for trust beneficiaries: Bamford and Colonial First State. Following these cases, the Tax Office took a new position that trustees of discretionary trusts could not stream components of income to particular…

The Tax Office has released a determination announcing the benchmark interest rate for Division 7A loans to be 7.8% for the 2012 financial year. TD 2011/20, NTAA Voice 206, p17

The Tax Office has released a determination announcing the luxury car limit of $57,466 for the 2012 year which is unchanged from the previous year. TD 2011/18, NTAA Voice 206,p17

Each year the Australian Securities and Investments Commissions (ASIC) reviews and indexes their charges for various services in regulating companies. Here are some fee changes for the 2012 financial year: + Annual review fee for a proprietary limited company up from $218 to $226.50; + Application for registration of a new proprietary limited company up from $412 to $426; + Change of company name up from $340 to $351; and + Application for the voluntary deregistration of a company up from $34 to $35. NTAA Voice 206,p12

The Tax Office has published a document titled Key events for Australia shareholders 2010 – 11 which contains links to class rulings about demergers, share buy-backs, creation of new stapled securities and returns of capital for key listed Australian shares and units. The key events for the 2011 year include: + Arrow Energy Limited: group demerger + Woolworths Limited: off-market share buy-back + Suncorp-Metway Limited: exchange of shares in Suncorp-Metway Limited for shares in Suncorp Group Limited + Westfield Group: restructure - capital distribution and dividend - creating a new stapled security + CSR Limited: - return of capital +…

A draft bill was released in August giving better protection for seniors taking on reverse mortgage loans and capping the bank’s recovery amount to the true market value of the property mortgaged. Where someone has retired they may be asset rich and income poor. They may own their home outright but have limited income on a Government pension. Over the last decade, banks have offered reversed mortgages where the pensioner can borrow significant funds, secured by mortgage over their house and not repay the money until the house is sold or they pass on. Interest compounds and is collected also…

The Rule of Law Institute of Australia has called for the Accountant’s Concession to be replaced with a form of tax advice privilege between the accountant and client to be made into law. The Accountant’s Concession provides guidelines to Tax Officers to protect confidentiality of certain tax advice correspondence between accountants and their clients. This concession has been criticised because Tax Office can ignore it (e.g. this was significant issue in the Paul Hogan matters). The current concession is contained in the Tax Office Access and Information Gathering Manual and it originated in 1989. In contrast, legal professional privilege applies…

The Productivity Commission released a draft report early in August about the current $1,000 low value threshold where GST and duty is not imposed on imported goods. Australian retailers have complained that the threshold makes for unfair competition as they have to charge GST and are suffering because consumers are no longer spending up big. The report indicates that collection cost would be three times the tax collected if the low value threshold was removed. The draft report indicates that 55 million international parcels valued under the $1,000 threshold arrive in Australia and that if the threshold was removed $578…

Personal director obligations for unpaid PAYG withholding tax will be beefed up under a draft bill released for comment. The bill also sheets home responsibility for unpaid super guarantee to company directors personally. The change was announced in the May Budget and was aimed at phoenix companies but significantly increases personal liability risk for all, including the most diligent directors. Currently, where a company has unpaid PAYG withholding liabilities the Tax Office can issue a Director’s Penalty Notice and the director has 21 days to either: + Cause the company to pay the tax; + Negotiate a payment arrangement for…

There are number of common errors in the way the self-managed super fund tax return is completed including the correct record of an instalment warrant/limited recourse borrowing arrangement for real property or securities. The Tax Office has reported common errors in the SMSF Newsletter. To overcome common errors in the superfund tax return, care should be taken to: + Record instalment warrants/limited recourse borrowing arrangements at the Derivatives and instalment warrants label and not at the real property label until the borrowing arrangement has been discharged; + Recording investments in the appropriate categories and not bundling them in the other…

The Tax Office website has set out some common mistakes that employers make to remind them of their super guarantee obligations: + Not providing the tax file number of the employee to their nominated superannuation fund within 14 days of the employer receiving it (the superfund might reject the contribution or the employee’s account in the superfund may be subject to extra tax); + Even where a contractor quotes an ABN, if the contract is wholly or principally for the contractor’s labour, the employer is still obliged to pay super guarantee; + Some employers pay insufficient super contributions for their…

The Tax Office is using data matching to catch out employers not paying fringe benefits tax for motor vehicles and living away from home allowances. The minutes of a Tax Office and industry liaison committee have been released and show Tax Office use of data matching to: • Identify excessive reductions to minimise the taxable value of living away from home allowances; • Employers that purchased high value new motor vehicles and have not registered for FBT; • The Tax Office also says it is using direct mail and phone campaigns including: + Contacting 1,000 employers whose FBT return lodgement…

Assistant Treasurer Bill Shorten has foreshadowed that legislation will be introduced to increase compulsory superannuation guarantee from 13%. He also said we will make the system fairer by ensuring no tax is paid on the 9% superannuation contributions for Australians earning up to $37,000 and that the money is instead directed into their superannuation. He argued that this Parliament must back the move from 9% to 12% to provide: • A more comfortable post work life; • Retirement incomes at 70% replacement rate of accustomed income; • Leverage the benefits of concessional tax, compound interest and dividend imputation; • For…

A package of Bills was introduced to the Federal Parliament to transfer responsibility for the registration of business names from eight state and territory Governments to ASIC. Where an individual, partnership or company operates a business using another name (apart from the legal name of the businessperson or entity) current state laws require that name to be registered in the applicable states or territories. If a business operates nationally with such a business name there may need to be up to eight separate registrations. Under the Australian Constitution the power for business name registration lies with State Governments and they…