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TAX | NEWS | VIEWS & CLUES
We are well into 2019 and what a lot of interesting developments. Politics is distracting; the Law pursues the wrong-doers with significant societal consequences; business is getting on with business, yet underlying all this are some very interesting developments. A significant further change now being considered is the treatment of private company loans to shareholders and associates, and unpaid present entitlements to trust distributions – broadly referred to as Division 7A loans and undrawn UPE's owing to a company. This is the subject of a Treasury discussion paper around proposed changes, to be effective from 1 July 2019 – this coming July! The short summary is that all Division 7A loan terms will be 10 years; the interest rate is moving to the small business overdraft rate – currently 8.28% (which is increased from the present 5.2%); minimum loan repayments will be equal payments of principal over the loan term; and interest will be calculated on the opening loan balance at 1 July each year. These measures will also apply to previously exempt 1997 loans from 1 July 2021. This is a BIG change for those affected! Further, there will no longer be any protection for loans from a company with no "distributable surplus".
As usual, please do not hesitate to call us on (02) 9891 6100 should you wish to discuss how any of the points raised in the report specifically affect you, or click here to send us an email. Warm regards, Martin
Liability limited by a scheme approved under Professional Standards Legislation Tax clinic trial to reduce tax regulatory burden To help reduce the regulatory burden on businesses, including the tax burden, the government has allocated $1 million to set up 10 tax clinics across Australia under a trial program based on the Curtin University Tax Clinic. Each clinic will receive up to $100,000 for 12 months to support unrepresented individual or small business taxpayers by providing general taxation advice and helping them with their tax obligations and reporting requirements. The clinics, through identifying issues and building greater understanding of the tax system in operation, are also designed to improve the interactions that small businesses and individual taxpayers have with the ATO. The clinics will cover advice, representation, education and advocacy, and will offer students training in the profession the opportunity to work with taxpayers, under the direct supervision of qualified tax professionals.
New "work test" exemption for recent retirees The work test requires that a person is "gainfully employed" for at least 40 hours in any 30-day consecutive period during the financial year in which the contributions are made. The contributions rules are complex, but with the right planning and advice you can maximise your contributions into superannuation at the right time. You should also consider other measures that may be available to you, such as "downsizer" contributions (certain contributions of proceeds from the sale of your home) and "catch-up" concessional contributions (accessing unused concessional cap space from prior years). ATO issuing excess super contributions determinations Concessional contributions include all employer contributions, such as the 9.5% superannuation guarantee and salary sacrifice contributions, and personal contributions for which a deduction has been claimed. You have 60 days from receiving an ECC determination to elect to release up to 85% of your excess concessional contributions from your super fund to pay your amended tax bill. Otherwise, you will need to fund the payment using non-superannuation money. Reviewing the tax treatment of granny flats Resolving tax disputes: government to help small businesses Small business tax offset: avoiding errors when claiming The offset (up to $1,000) is worked out by the ATO on the proportion of income tax payable on an individual's taxable income that is net small business income. For 2018–2019 and 2019–2020 the rate of offset is 8%. Not sure if you're making the most of the tax offset for your small business? We can help – contact us today to find out more. Home office running expenses and electronic device expenses The basic principles have been amended to emphasise that you must actually incur the expenses you claim, and that there must be a real connection between your use of a home office or device and your income-producing work. On the other hand, the requirement that your income-producing use must be substantial – not merely incidental – has been removed. There is new information on what type of evidence you need to be keep, and the cents per hour rate you can claim for eligible home office running expenses has increased from from 45 cents to 52 cents per hour, effective from 1 July 2018. Genuine redundancy payments: alignment with Age Pension age Currently, an individual must be aged below 65 at the time their employment is terminated to qualify for a tax-free component on a genuine redundancy payment or an early retirement scheme payment. Genuine redundancy payments are made when a job is abolished, and early retirement scheme payments are made when a person retires early, or resigns, as part of a scheme put in place by an employer. Where an individual is under age 65 and meets the requirements of the Income Tax Assessment Act 1997, they receive tax-free a base amount of $10,399 (for 2018–2019), plus $5,200 for each whole year of service. The government says it will amend the law to align genuine redundancy and early retirement scheme payments with the Age Pension qualifying age from 1 July 2019. GST on property developments involving government The ATO is concerned that some developers and government entities are not reporting the value of their supplies under these arrangements in a consistent manner, resulting in GST being underpaid. |
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