Newsletter - October Edition
Cents & Sensibility | Tax News | Views | Clues
Changes in Australian Taxation Office (ATO) Processes for Self-Managed Superannuation Fund (SMSF) Establishment
By Victoria Kogan
The ATO has strengthened its compliance processes regarding the establishment of new SMSFs. In the new process, the ATO will undertake various checks on the SMSF before the SMSF is determined “compliant”. This can take from a few days, up to 56 days. Most SMSFs are regulated as “complying” in under two months, but it can take longer where a more extensive investigation is required.
When a registration application delay occurs, it is important to remember that the ATO does not automatically accept every registration application that it receives. Each registration is risk assessed to ensure there is no illegal activity in the fund. For every new SMSF applicant, the ATO considers all the trustees and other entities that they have controlled. This includes considering history of insolvency, crimes related to dishonesty and previous SMSF history.
The ATO also considers personal lodgement and payment history and may refuse to proceed with the registration if a member has outstanding personal income tax returns or Business Activity Statements. If the ATO has any concerns about an application, it will withhold the registration and will let the trustees and/or tax agent know that it is investigating the application. During this process, the ATO may contact either one or all potential members of the Fund for a detailed discussion about the purpose of the SMSF.
These strengthened compliance procedures are undertaken to determine whether the SMSF is being used as a vehicle to gain illegal, early access to super benefits and whether the individuals associated with the SMSF have been identified as “tax persons of interest”.
These delays can also result in hold-ups with initiating rollovers from other Superannuation Funds into the newly established SMSF as well as opening an SMSF bank account. Clients considering the establishment of a new SMSF, should provide ample time to allow the ATO to perform its extensive checks.
Small Business Capital Gain Tax (CGT) Concessions
By Ronald Cheng
If you are planning to buy, sell or restructure a business, there are different tax implications that need to be considered. Proper tax planning, including the application of the small business CGT concessions could optimise the tax outcome substantially.
Broadly, there are four CGT concessions available for small businesses:
- Small business 15-year exemption
- Small business retirement exemption
- Small business 50% active asset reduction
- Small business rollover (and restructure rollover)
Basic conditions apply to all four CGT concessions, including eligible entity test and active asset test. Each CGT concession also has specific conditions to meet and different impacts on the net capital gain calculation. Some CGT concessions can interact with other concessions, including the general 50% discount (where you have held the capital asset for more than 12 months).
For example, the CGT on the disposal of business active asset could be reduced to nil by applying the 15-year exemption, or a combination of the other three concessions. This is in addition to the general discount, depending on your circumstances.
The application of the small business CGT concessions is complex and should be assessed on a case-by-case basis. Contact your knp representative for information suited to your individual requirements.
Div.293 concessional contribution assessments have been issued
The ATO has recently issued approximately 30,000 Division 293 assessments for the 2018/19 and 2019/20 financial years.
Editor: Division 293 tax is an additional tax on super contributions, which reduces the tax concession for individuals whose combined income and contributions are greater than the Division 293 threshold (currently $250,000).
Due to a system issue, concessional contributions reported for these financial years were not included in Division 293 assessments where that super account was also reported as closed during that financial year. This reporting issue was resolved in June 2021, and this has resulted in affected members receiving either an initial or amended Division 293 assessment.
Travel allowances and 'LAFHAs'
The ATO has released a Ruling explaining:
- when an employee can deduct accommodation and food and drink expenses when travelling on work;
- the FBT implications, including the application of the 'otherwise deductible rule', where an employee is reimbursed for accommodation and food and drink expenses, or where the employer provides or pays for these expenses; and
- the criteria for determining whether an allowance is a 'travel allowance' or a 'living-away-from-home allowance' ('LAFHA') benefit.
Whether accommodation and food and drink expenses are deductible depends on the facts and circumstances of each case, so the Ruling uses examples to show how to determine the deductibility of these expenses in a range of situations.
Time running out to register for the JobMaker Hiring Credit
The JobMaker Hiring Credit scheme's third claim period is now open, so if a taxpayer has taken on additional eligible employees since 7 October 2020, they may be able to claim JobMaker Hiring Credit payments for their business.
Eligible businesses can receive up to:
- $10,400 over a year for each additional eligible employee hired aged 16 to 29 years; and
- $5,200 over a year for each additional eligible employee hired aged 30 to 35 years.
The JobMaker Hiring Credit is available to businesses for each additional eligible employee hired before 6 October 2021, so, if a business is thinking about taking on extra staff, they should check if they are eligible to participate in the scheme.
Labour commits to income tax cuts and certainty on negative gearing
The ALP has formally announced that, if elected to Government, they will deliver "the same legislated tax relief . . . as the Morrison Government".
This means they have committed to upholding the legislated changes to personal income taxes and will also maintain the existing regimes for negative gearing and capital gains tax to provide "certainty and clarity to Australian working families after a difficult two years for our country and the world".
Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.
Continuing our recent lockdown team activities, we transitioned from the cooking… to cartoon drawing! The team joined a zoom call where caricaturist, Sam McNair, hosted a private illustration session.
The session was thoroughly enjoyed by all as we carefully followed Sam's best tips and tricks. Sam focused our cartoons on a Disney theme, which certainly brought back some memories for most of us!
Check out our efforts drawing Disney's Flounder!