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Firm Journal

Super co-contributions

Posted on 18 October '17, under super.

Individuals may be eligible for a Government super co-contribution.

A Government co-contribution means the Government adds to your super. You may be eligible for the super co-contribution, low-income super contribution (LISC) from the 2012-13 to 2016-17 financial years, or low-income super tax offset (LISTO) from 1 July 2017.

Super co-contribution
The Government will make a co-contribution of up to $500 if you are a low or middle-income earner and make personal (after-tax) contributions to your fund.

The eligibility conditions for a co-contribution from the 2017-18 financial year include:
a total superannuation balance less than the general transfer balance cap for that year
the contribution you made to your super fund must not exceed your non-concessional contributions cap for that year.

Low-income super contribution
The low-income super contribution (LISC) is a Government super payment of up to $500 to help low-income earners save for retirement.

If you earn $37,000 or less a year, you may be eligible to receive a LISC payment directly into your super fund.

The LISC is 15 per cent of before-tax super contributions made you or your employer from the 2012-13 to 2016-17 financial years.

If you have reached your ‘preservation age’ and are retired you can apply to have your LISC paid directly to you.

Low-income super tax offset
The low-income tax offset (LISTO) was introduced from 1 July 2017. If you earn income up to $37,000, you may be eligible to receive a refund into your super account. This is on the tax paid on your concessional super contributions up to a cap of $500.

This means most low-income earners will pay no tax on their super contributions.

Selling your home and CGT

Posted on 18 October '17, under tax.

When it comes time to sell your home, you may be wondering if you will need to pay capital gains tax (CGT).

Generally, if you live in the home you are selling you will not have to pay CGT under the main residence exemption.

The ATO considers a dwelling as your main residence if:
– you and your family live in it
– your personal belongings are in it
– it’s the address your mail is delivered to
– it’s your address on the electoral roll, and
– services such as gas and power are connected.

If the home has been used to produce assessable income such as running a business from it, renting it out or flipping it, you may not be entitled to the full main residence exemption from CGT. This means you will have to pay CGT on part of any capital gain made when your sell your home.

For those who use their home to produce income, i.e., renting out part or all of it, you can work out the capital gain that is not exempt by taking into account the following factors:
– proportion of the floor area that is set aside to produce income
– period you use it for this purpose
– whether you’re eligible for the ‘absence’ rule
– whether it was first used to produce income after 20 August 1996.

Splitting super

Posted on 13 October '17, under super.

When partners in an SMSF separate, there are specific legal and tax implications that should be considered.

It is possible to split super benefits, i.e., transfer assets, such as property, from one super fund into another and roll money over to another fund; however, trustees need to keep the following in mind:

  • Separating couples need to work out how they will split their super. They can choose to enter into a formal written agreement, seek Consent Orders, or if the separating couple cannot reach an agreement, they can seek a court order.

  • It is important to have necessary documentation in the event of an ATO audit including financial and non-financial records. Due to the tax outcomes of splitting super in an SMSF, it is essential to have documentation, such as the notice for splitting the super, to show a genuine separation.

  • There is the potential for SMSFs with property as a major form of investment to create a liquidity problem; however, this can be addressed with future contributions. Individuals will also need to be aware of the market valuation rules for real estate in SMSFs.

  • If one member establishes a new single-member fund it is advisable to incorporate a special purpose company as the trustee. This avoids having a second person as a trustee.

  • Trustees can now acquire assets from a related party of the fund (in-house assets) as a result of marriage breakdown. Legislation was recently amended to broaden the scope to the breakdown of opposite-sex and same-sex de facto relationships. Where in-house assets are acquired as the result of a relationship breakdown, transitional exemption provisions apply.

Protecting honest businesses

Posted on 13 October '17, under tax.

In its effort to facilitate a fair business environment, the ATO has offered continued support for honest businesses.

With an estimated $40 billion lost to the hidden economy, the need for strong diligence and continued governance over Australian businesses is essential. The Black Economy Taskforce that was established in May 2017 and various trends have since been better understood regarding strategies dishonest businesses and individuals are using to evade their tax responsibilities.

Trends show that problematic areas include:

  • The sharing economy: the money exchanged through services such as Airbnb, Airtasker and Uber are all taxable. Ensure you understand how to be compliant before engaging with these services.
  • Cash transactions: employers paying employees in cash to avoid tax and super responsibilities costs the economy an astronomical amount, as well as contractors accepting cash payments and not accurately documenting these.
  • Incorrect reporting: individuals and businesses failing to report their business dealings correctly are creating huge liabilities in the economy. Small reporting dishonesties by a great portion of taxpayers creates a large balance of unaccountable money; the majority of unaccountable money in relation to tax evasion.

Transfer balance account report now available

Posted on 5 October '17, under super.

The new transfer balance account report (TBAR) is available on the ATO’s website.

Self-managed super funds can use the TBAR report to report events that affect an individual member’s transfer balance account. The option to report is available from 1 October 2017, however, SMSFs are not required to report anything until 1 July 2018.

Events that affect a member’s transfer balance account will need to be reported to minimise the tax consequences of exceeding the transfer balance cap.

Funds with straightforward affairs are likely to have only a few events per member to report over the life of the fund. Common events that will require reporting include:

  • the values of any retirement phase income streams to which an SMSF member is entitled, including reversionary income streams
  • the value of any commutation of a retirement phase income stream by an SMSF member
  • structured settlement payments an SMSF member receives and contributes to their fund
  • certain limited recourse borrowing repayments that give rise to a transfer balance credit as a result of recently enacted legislation.

Reporting SMSF changes

Posted on 5 October '17, under tax.

Self-managed super fund trustees must notify the Australian Tax Office (ATO) if there are changes to their SMSF.

Trustees must provide written notice within 28 days if there are changes to:

  • the name of the fund
  • the address of the fund
  • details of the contact person
  • the membership of the fund
  • the trustees of the fund
  • the directors of the fund’s corporate trustees
  • your SMSF’s bank account details and Electronic service address.

The above details are used by the ATO to determine if your fund meets the definition of an SMSF.

Providing incomplete or inaccurate information may make it impossible for your fund to receive rollovers or contributions.

If any of these details change for your SMSF, contact our office to update your details.

Keeping your SMSF compliant while overseas

Posted on 27 September '17, under super.

Travelling overseas for an extended period of time is an exciting adventure. What isn’t so exciting is the prospect of breaking compliance laws in relation to your SMSF while enjoying your trip.

There are specific conditions that must be met to deem the self-managed super fund ATO compliant. They are as follows:

Fund recognised as an Australian fund
The SMSF will be recognised as an Australian super fund provided that the setup of and initial contributions are likely to have been made and accepted by the trustee(s) in Australia or at least one of its assets is located in Australia.

Management and control of the fund carried out in Australia
The central management and control of the fund must ordinarily be in Australia. This means the SMSF’s strategic decisions are regularly made, and high-level duties and activities are performed in Australia. Some examples include formulating the investment strategy, reviewing the performance of the fund’s investments and determining how assets are to be used for member benefits.

Generally, fund’s will meet this condition even if its central management and control is temporarily outside Australia for up to two years. If central management and control of the fund is permanently outside Australia for any period, it will not meet this requirement.

Active member test
An “active member” is a contributor to the fund or contributions to the fund have been made on their behalf.

To satisfy the “active member test” trustees should ensure the fund has no active members, or it has active members who are Australian residents and who hold at least 50 per cent of the total market value of the fund’s assets attributable super interests, or the sum of the amounts that would be payable to active members if they decided to leave the fund.

If a member of the fund becomes a non-resident but still wishes to make or receive contributions, they should do this outside of their SMSF, i.e., through a retail or industry super fund. When they return as an Australian resident, they can then rollover the contributions to their SMSF.

Imported services and GST

Posted on 27 September '17, under tax.

Under the new law introduced on 1 July 2017, Australian GST registered businesses that import services or digital products for business purposes do not have to pay GST.

These businesses will need to supply their Australian business number (ABN) and a statement that they are registered for GST to the supplier at the time of purchase to ensure they are not charged GST.

Overseas businesses registered under the simplified GST system for non-residents do not have an ABN and cannot issue a tax invoice. If a business believes that GST has been charged, they will need to contact the supplier and seek a refund if appropriate.

However, if an Australian business is not registered for GST or their purchases are not for business use, they will need to pay GST and will not be able to claim it back.

How does the super guarantee charge work?

Posted on 20 September '17, under super.

Employers who do not pay the minimum amount of super guarantee for their employee(s) by the due date may have to pay the super guarantee charge (SGC).

The charge is made up of super guarantee shortfall amounts including any choice liability calculated on your employee’s salary or wages, interest on those amounts (currently 10 per cent) and an administration fee ($20 per employee, per quarter).

Employers must report and rectify the missing payment by lodging an SGC statement by the due date and paying the SGC to the ATO. Employers may be able to use a late payment to reduce the amount of SGC, however, they must still lodge an SGC statement and pay the balance of the SGC to the ATO.

The ATO prioritises the collection of unpaid SGC debts. If an employee reports an employer for unpaid super, the ATO will investigate on their behalf.

Employers must lodge their SGC statement and pay the charge by the due date.

Quarter Period Due date
1 1 July – 30 September 28 November
2 1 October – 31 December 28 February
3 1 January – 31 March 28 May
4 1 April – 30 June 28 August

If a due date falls on a weekend or public holiday, the payment can be made the next working day.

Once the statement has been lodged and the SGC is paid, the ATO will transfer the super guarantee shortfall amount and any interest to the employee’s chosen super fund.

Ride sourcing – Claiming car expenses

Posted on 20 September '17, under tax.

Those who participate in ride-sourcing (i.e., Uber, GoCatch) as a driver can access a number of tax deductions come tax time.

You may be able to claim expenses such as:
– Parking fees
– Road tolls
– Mobile phone costs
– Fees or commissions charged the facilitator
– Other expenses – to the extent that they relate to work-related travel.

Under the logbook method (the business-use percentage of car expenses) include:
– Petrol
– Depreciation of your car
– General vehicle running costs such as insurance, car rego and repairs
– Maintenance.

Expenses you cannot claim include:
– Fines, such as parking and speeding fines
– Fuel tax credits
– The cost of getting and maintaining a standard driving licence
– Costs of a capital nature, such as car purchase price
– Personal or private expenses, such as the private use of a car used for ride-sourcing activities.

If you use your car for both personal and work-related use, you will need to apportion your car expenses appropriately. If the owner of the car is a spouse or de-facto partner, you can still claim deductions for the car as it is considered a joint asset.

You may be eligible for a range of concessions, i.e., simpler depreciation – instant asset write-off if you are a small business entity in an income year. Be sure to review your eligibility each year.