CGT withholding measures now
law
The
Government recently passed legislation making changes to the foreign resident
capital gains withholding laws (among other changes).
Editor: Foreign resident capital gains withholding is relevant for all vendors selling certain taxable real property (eg. Australian land).
Even Australian residents can be caught by these laws, if they do not have a valid 'clearance certificate' issued by the ATO at, or before settlement, tax must be withheld from the sale proceeds and paid to the ATO.
The new legislation increases the foreign resident capital gains withholding rate to 15% (from 12.5%), and completely removes the threshold (currently $750,000) before which withholding applies.
This
means that all disposals of taxable real property are potentially subject to
foreign residents' capital gains withholding requirements regardless of
the market value of the CGT asset.
These amendments take effect from 1
January 2025.
ATO debunks Division
7A 'myths'
Editor: The ATO has recently published a document 'debunking' various Division7A 'myths'.
Division 7A of the tax legislation is intended to prevent profits or assets being provided to shareholders or their associates tax free.
A payment or other benefit provided by a private company to a shareholder or their associate can be treated as a dividend for income tax purposes under Division 7A, even if the particulars treat it as some other form of transaction (such as a loan, advance, gift or writing off a debt).
Division 7A can also apply if a trust has allocated income to a private company but has not actually paid it, and the trust has provided a payment or benefit to the company's shareholder or their associate (as well as in other circumstances).
Myth 1: If I own a company, I can use the company money any way I like.
ATO
response: A company
is a separate legal entity, and there will be consequences every time the
taxpayer takes money or accesses other benefits from their private company.
Myth
2: Division 7A only applies to the shareholders of my private company.
ATO
response: Division
7A applies to both shareholders and their 'associates'. The definition of an 'associate' is broad.
Myth
3: I don't need to keep records when my
private company makes payments, loans or provides other benefits to other
entities.
ATO
response: Taxpayers
are legally required to keep records of all transactions relating to their tax
affairs when they are running a business.
Myth
4: I can avoid Division 7A by
temporarily repaying my loan before the private company lodges its tax return,
and using the company's money to make my repayments.
ATO response: A repayment made on a loan may not be
taken into account if similar or larger amounts are reborrowed from the same
company after making the repayment.
Myth
5: There
are no tax consequences if I use my private company's money to fund another
business or income earning activity.
ATO
response: Division
7A may apply to any loan a private company makes to its shareholders or their
associates, regardless of what the loan recipient uses the amounts for.
ATO's notice of rental bond data-matching program
The
ATO will acquire rental bond data from State and Territory rental bond
regulators bi-annually for the 2024 to 2026 income years, including details of
the landlord and tenant, managing agent identification details, and rental bond
transaction details.
The
objectives of this program are to (among other things) identify and educate
individuals and businesses who may be failing to meet their registration or
lodgment obligations.
The
ATO expects to collect data on approximately 2.2 million individuals each
financial year.
Study/training
loans - What's new
The
indexation rate for study and training loans is now based on the Consumer Price
Index ('CPI') or Wage Price Index - whichever is lower.
This
change has been backdated to indexation applied from 1 June 2023 for all HELP,
VET Student Loan, Australian Apprenticeship Support Loan, and other study or
training support loan accounts.
Consequently,
indexation rates for 2023 and 2024 have changed to:
- 3.2% for 1 June 2023 (reduced
from 7.1%); and
- 4%
for 1 June 2024 (reduced from 4.7%).
Individuals
who had a study loan that was indexed on 1 June 2023 or 1 June 2024 do not need
to do anything.
Individuals whose study loan is in credit after the adjustment may
receive a refund for the excess amount to their nominated bank account, if they
have no outstanding tax or Commonwealth debts.
When to
lodge SMSF annual returns
All
trustees of SMSFs with assets (including super contributions or any other
investments) as at 30 June 2024 need to lodge an SMSF annual return ('SAR') for
the 2023/24 financial year.
The SAR is more than a tax return - it is required to report super regulatory information, member contributions, and pay the SMSF supervisory levy.
However, not all SMSFs have the same
lodgment due date:
- Newly registered SMSFs and
SMSFs with overdue SARs for prior financial years (excluding deferrals) should
have lodged their SAR by 31 October 2024.
- All other self-preparing
SMSFs need to lodge their SAR by 28 February 2025 (unless the ATO has
asked them to lodge on a different date).
- For
SMSFs that lodge through a tax agent, the due date for lodgment of their
SAR is generally 15 May or 6 June 2025.
SMSFs
that have engaged a new tax agent need to nominate them to confirm they are the
authorised representative for the fund.
SMSF
trustees must appoint an approved SMSF auditor no later than 45 days before
they need to lodge their SAR. Before
they lodge, they must ensure that their SMSF's audit has been finalised and the
SAR contains the correct auditor details.
Editor: If you assistance with these or any other SMSF issues, please contact our office.
$13.6m in penalties imposed for false R&D claims
A
joint investigation involving the ATO found that, between 2014 and 2017, a
Sydney business coach promoted unlawful tax schemes encouraging clients to
lodge over-inflated, inaccurate or unsubstantiated research and development
('R&D') tax incentive claims.
The
Federal Court recently handed down judgment against the business coach, his
company co-director (and former tax agent), and their related companies,
ordering that the business coach pay a penalty of $4.5 million, in addition to
$9 million in penalties for the related companies.
The
company co-director was also ordered to pay $100,000 for their role in
promoting the schemes.
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.