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Non-arm’s length income from trusts and SMSFs

Posted on March 28, 2018 by admin


The ATO is reminding self-managed super funds (SMSFs) of the rules regarding non-arm’s length income from trusts. The non-arm’s length income rules can apply to investments, transactions and other arrangements undertaken by SMSFs when the terms of the relevant investment, transaction or arrangement are uncommercial in nature. If income is distributed from a discretionary to a SMSF beneficiary, it is: – automatically deemed non-arm’s length income of the SMSF (regardless of the nature of the dealings of the relevant parties) – taxable at the highest marginal tax rate. Income received by a SMSF that is a fixed entitlement to trust income is also non-arm’s length income if it is: – income from a scheme where the parties were not dealing with each other at arm’s length – more than the SMSF might have expected to derive if the parties were dealing with each other at arm’s length. If you are unsure whether income from trusts is considered arm’s length income, contact our office.


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Bitcoin tax scammers

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The Australian Tax Office (ATO) is warning taxpayers to be aware of scammers impersonating the Tax Office and demanding cryptocurrency such as Bitcoin as payment for fake tax debts. The ATO became aware of these fraudsters late last year with over $50,000 paid in Bitcoin to scammers claiming fake ATO debts. Once scammers receive payment, it is virtually impossible to recover it as cryptocurrency operates in a digital world. The ATO is also warning taxpayers to be wary of other tax scams such as those demanding direct deposits into third-party bank accounts, demanding payment via iTunes cards or with a prepaid Visa gift card. Over 80,000 scams were reported to the ATO in 2017, accounting for almost $2.4 million lost to scammers impersonating the ATO. Almost one-third of victims were targeted with iTunes gift card scams, resulting in over $900,000 lost to scammers. More than half of all losses (roughly $1.2 million) were from deposits or transfers made directly into third-party bank accounts. Scammers are also targeting taxpayers’ personal information with many reports of scammers asking for an individual’s Tax File Number.


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SMSFs and cryptocurrencies

Posted on March 23, 2018 by admin


Bitcoin and other cryptocurrencies have become increasingly popular over the past few years. As many keen investors jump on board, the ATO is reminding SMSFs to be aware of the tax consequences. Cryptocurrencies are classified as capital gains tax (CGT) assets, therefore, upon their disposal they may be subject to capital gains tax (CGT). It is essential to keep records of cryptocurrency transactions within a SMSF such as acquiring and disposing a cryptocurrency. An investment within a SMSF must: – Be allowed under the trust deed – Be in accordance with the investment strategy of the fund – Comply with SISA and SISR regulatory requirements When an SMSF invests in a cryptocurrency it must follow the same regulatory requirements that apply to investments in other assets. For example, super laws pertaining valuation, ownership and separation of assets, related party transactions, pension or benefit payments, sole-purpose test and voluntary disclosures apply to all cryptocurrency transactions.


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Employers urged to act now for Single Touch Payroll

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The Australian Tax Office (ATO) is urging employers with 20 or more employees to prepare for the introduction of Single Touch Payroll. Single Touch Payroll will be introduced from 1 July 2018, requiring employers to report their employee’s tax and super information to the ATO through Single Touch Payroll approved software. Employers will report each time they pay their employees, i.e., weekly, fortnightly or monthly. The information that will be reported includes withholding amounts, superannuation liability information or ordinary times earnings (OTE) and salary, wages, allowances and deductions. Single Touch Payroll will provide greater transparency and connect businesses to the ATO through their existing software. Employers must prepare by organising the following: A headcount of employees on 1 April 2018 to determine if there is 20 or more. If your numbers drop down to 19 or less, you will still continue to report through Single Touch Payroll unless you apply for and are granted an exemption. Talk to your software provider about how and when your product will be ready. Those without a software provider will need to find a provider that offers Single Touch Payroll. Update your payroll software when it’s ready. Start using Single Touch Payroll. Employers with […]


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Eligibility for the downsizer measure

Posted on March 16, 2018 by admin


As of 1 July 2018, the Government will introduce a new measure that allows the contribution of up to $300,000 of proceeds from downsizing a home to be added to superannuation. The new measure will benefit those aged 65 years and over, provided they meet certain eligibility rules including: The amount you are contributing is from the proceeds of selling your home where the contract of sale was exchanged on or after 1 July 2018. Your home was owned by you or your spouse for 10 years or more prior to the sale. Your home is in Australia and is not a caravan, houseboat or other mobile home. The proceeds from the sale of the home (capital loss or gain) are exempt or partially exempt from CGT under the main residence exemption, or would be entitled to such exemption if the home was a CGT rather than pre-CGT asset. You have provided your super fund with the downsizer contribution form either before or at the time of making your downsizer contribution. You make your downsizer contribution within 90 days of receiving the proceeds from the sale (usually the date of settlement). You have not previously made a downsizer contribution to […]


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Tax tips for property investors

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Property investors can access a wide range of tax deductions and items subject to depreciation for their rental property yet many miss out on unknown tax breaks, foregoing an average of $20,000 a year on a $1 million house. Here are four ways to maximise your tax deductions while complying with the tax office: Use a quantity surveyor Registered quantity surveyors can establish the value of purchased items and building construction costs by preparing depreciation schedules to maximise an investor’s claim. Items as diverse as kitchen equipment, bathroom fittings, outdoor furniture, air conditioning and swimming pools are all legitimate claims. A quantity surveyor will ensure valuations of the items in the building are at market value, avoiding the need to explain any valuations that are higher than expected to the ATO. The cost of using a quantity surveyor is also tax deductible. Apportion expenses It is common for investors to bundle a mix of properties under one single loan, i.e. the family home and a rental property may be funded by the same mortgage and expenses apportioned accordingly. However, having separate loans can increase deductions as the non-deductible debt can be paid down or even better linked to an offset […]


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Setting up your SMSF correctly

Posted on March 9, 2018 by admin


Setting up your self-managed super fund can be a daunting process; you want to ensure you are covering all legal requirements throughout the process. The Australian Taxation Office has outlined steps to take when setting up your SMSF to ensure you are eligible for tax concessions, able to receive contributions and looked after if a trustee is unable or decides they no longer wish to be the active trustee. When setting up your SMSF, you ought to consider the following: Whether you wish to appoint a professional financial advisor to help you. If you do not have any experience with super regulations, this is a wise approach. Laws and regulations are constantly changing, and it is safest to work with someone who knows what they are doing. Decide whether to have individual trustees or a corporate trustee. Generally, a corporate trustee structure often costs more money to set up but removes individual liability as the SMSF acts under the company’s name. Ensuring all SMSF members sign a trustee declaration within 21 days of becoming a trustee or director of the corporate trustee. Tax File Number (TFN) and an Australian Business Number (ABN). You will then need to provide the ATO […]


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Work-related expenses

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The Australian Taxation Office is continuing to pay close attention to claims made as ‘work-related expenses’ throughout 2018. Making incorrect claims of work-related deductions can land you in hot water with the ATO, and thus it is important you can justify these claims. In order to claim correctly, you must be able to show that: You spent the money yourself and were not reimbursed. The expense was directly related to earning your income, and You have appropriate records and documentation to prove it. If you are making a claim for an expense that you use for both business and privately, you may only claim the portion of the expense that was related to business.


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Common SMSF mistakes to avoid

Posted on March 5, 2018 by admin


Running a self-managed super fund can be a great strategy for your super and your retirement, provided you manage it correctly. To ensure you can enjoy the later stages of life and retire comfortably, you will need to be aware of common SMSF mistakes and how to avoid them. Record keeping Bad record keeping when it comes to SMSFs is very common and very problematic. If the ATO decides to look into your SMSF and your record keeping is subpar, you and the rest of the members of the fund could land themselves in hot water. Good record keeping practices are a great preventative measure for being liable for fines and penalties should the ATO choose to investigate the fund. It is also a great habit to get into as proper documentation makes all decision making regarding your fund much more legitimate. Financial assistance or loans to members By law, you cannot loan or offer financial assistance to a member of the self-managed super fund at any time, either directly or indirectly. Many members entertain the mindset that because it is their money, they can allocate loans to other members and to themselves, but this is not the case. Should […]


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Tax deductible legal expenses

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While we like to think of business ventures as a platform to make money, there are also many expenses that will be incurred through running one. Luckily, there are many tax deductions a business owner can claim when it comes to the expenses their business incurs, in particular their legal expenses. Understanding what these tax deductible expenses are and how to apply for these deductions appropriately can see you save a considerable amount of money, which can be transformed into profit. Specific expenses incurred will or won’t be deductible depending on whether the expenditure is capital, domestic or private in nature. The following expenses are not deductible under regular legal expense deductions, due to being either capital or private in nature. Deductions can be claimed under a separate provision. These include: Preparations of income tax return Obtaining professional tax advice Borrowing expenses Mortgage discharge expenses Preparation of leases The circumstances in which legal fees incurred can be easily deducted for tax purposes, provided the correct procedure is followed and appropriate criteria is met, include the following: Defending wrongful dismissal action, defending defamation action brought against a company board and defending unauthorised use of trademark. Pursuing claims for workers’ compensation. When […]


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Protect yourself from early super release scams

August 7, 2018

When it comes to protecting your nest egg, avoid getting caught out by a promoter of an illegal early release super scheme.

Early release super scheme scams will involve a promoter contacting you and offering to help you access your super early. They usually target individuals under significant financial pressure or those who are not knowledgeable about super laws and the repercussions and penalties involved in illegally accessing your super.

You can only access your super when you meet a condition of release.

Generally, when you:
– Are 65 years old (even if you have not yet retired).
– Reach your preservation age and retire.
– Reach your preservation age and begin a transition to retirement income stream while still working.

There are special circumstances where you may be able to access your super early.

These special circumstances include:
– Severe financial hardship
– Temporary or permanent incapacity
– Compassionate grounds
– Temporary residents leaving Australia
– Super death benefits (inheriting super)
– Super less than $200
– Terminal medical condition

To avoid falling for an illegal early super release scam, be wary if the promoter:
– charges high fees and commissions;
– requests identity documents;
– claims you can access your super and put the funds towards whatever you wish;
– and tries to persuade you to transfer or rollover your super from your existing fund to a self-managed super fund (SMSF) in order to access your super before you are legally entitled.