The government is acting to simplify the Division 7A rules that govern deemed dividends, proposing a new 10-year loan model for compliant loans. Significantly, companies with existing loans would be forced to transition to the new model, which also includes a considerably higher benchmark interest rate.
Limited recourse borrowing arrangements have allowed many SMSFs to successfully invest in assets they otherwise would not have been able to acquire. However, proposed new laws that seek to count a portion of an SMSF’s loan balance towards some members’ own “total superannuation balance” may create liquidity headaches for some members.
The sharing economy is booming in Australia with a large proportion of the population either making it their full-time job or making a little extra money on the side. However, with the boom comes the all-seeing-eye of the ATO which is now firmly focused on the sharing economy. Its latest target are those people who rent/hire their car out in car sharing arrangements, but this is by no means its only focus, and comes on the back of a data-matching program on online accommodation platforms.
Setting up your own self-managed super fund (SMSF) can be a complex task even before you seek registration with the ATO. It’s important that the SMSF be set up correctly for the sole purpose of providing retirement benefits for their members. Once you get to the ATO registration stage, it acts as the gatekeeper and uses analytical risk models to ensure that only genuine trustees are allowed into the SMSF sector.
The sole purpose test is one the fundamental requirements for SMSFs to obtain tax concessions. It requires that the SMSF be maintained for the sole purpose of providing retirement benefits to its members or their dependents if a member dies before retirement. Broadly, the test can be contravened when a member or a related party, directly or indirectly obtains a financial benefit when making an investment decision. Trustees need to be careful of this area as the ATO has a very high standard in relation to the compliance required under this test.
The black economy is a significant growing economic and social issue in Australia. By some estimates, the size of the black economy is around 3% of GDP or around $50 billion. In response, the government established the Black Economy Taskforce to investigate and formulate ways to combat the rise of the black economy. One of the recommendations by the Taskforce was to extend the existing Taxable Payments Reporting System (TPRS) which currently only applies to the building and construction industry to addition high-risk industries.
Superannuation complaints are moving to a new destination from 1 November 2018. Previously, super fund complaints relating to the areas of regulated superannuation funds, annuities and deferred annuities, or retirement savings accounts was the domain of the Superannuation Complaints Tribunal. However, the Australian Financial Complaints Authority is the new government body set to take over. It has been touted by the government as a free one-stop shop for all financial complaints and will be more accountable to users.
Are you a business that has had a GST refund held up as a part of the ATO’s risk assessment program to verify GST refunds? The Inspector-General of Taxation (IGT) has recently completed and released his review into ATO’s practice and the findings are surprisingly good for the ATO. Even so, as a part of the review, the IGT made several recommendations to improve the process which the ATO has mostly agreed to.
How often must your SMSF be audited? Currently it is every year, but the government has proposed to extend this to a 3-year cycle. The benefits are meant to be less red tape and lower costs, but there are concerns that this may not be the outcome.
If you don’t have a self-managed super fund yourself (an SMSF), then almost certainly you know someone who does. There were over 596,000 SMSFs in Australia as at June 2018. The majority of these were 2-member funds run by spouses, ie family members. The SMSFs have assets totalling over $750 billion, or about a quarter of all superannuation assets. The numbers are impressive.
There’s finally some certainty about the corporate tax rate(s). Legislation has recently passed Parliament and the fate of other proposed changes has also been finalised. The law is settled, so it’s a good time to remind ourselves what the final state of play is concerning the dual rates of 27.5% and 30%.
There are two categories of companies when it comes to the corporate tax rate. The two categories are determined by turnover and business activity.
The rate of 27.5% applies to corporate tax entities known as “base rate entities”. What is a base rate entity? Put simply, it is a company which carries on a business and has an aggregated turnover of less than $50 million. This is up from $25 million in the last financial year (ie 2017-18), but will stay at $50 million until 2023-24. The ALP has confirmed that it will not change the rules for base rate entities if elected – so there we have our first certainty.
