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ATO targeting mischaracterised lifestyle assets and private pursuits

The Australian Tax Office (ATO) is targeting privately owned and wealthy groups that display specific behaviours and characteristics in relation to their tax affairs and lifestyle.

A large focus is currently on lifestyle assets and private pursuits that generate deductions or are mischaracterised as business activities. The ATO is also looking at those assets and pursuits which are incorrectly accounted for in terms of Division 7A or Fringe Benefits Tax (FBT).

Activities that attract the Tax Office’s attention include:
– private aircraft ownership or activities
– art ownership and dealings
– car or motorbike racing activities
– luxury and charter boat activities
– enthusiast or luxury motor vehicles
– grape growing and other farming pursuits
– horse breeding, racing and training activities
– holiday homes and luxury accommodation provision
– sporting clubs and other activities involving the participation of principals or associates of principals of private groups.

The ATO is addressing the following tax risks:

Income tax
– Entities claiming deductions from ownership lifestyle assets or private pursuits against other income derived by the entity but not carrying on a business.
– Individuals disposing of assets and not declaring the revenue or capital gains on those disposals.
– Entities incorrectly apportioning deductions where assets have been used privately or periods not available for rent or hire.
– Division 7A – individuals purchasing assets through their business entities but applying assets to the personal enjoyment of a shareholder or associate of a private company giving rise to a deemed dividend.

FBT
– Individuals purchasing assets through their business entities but applying those assets to the personal enjoyment of an employee or associate giving rise to a FBT liability.

GST
– The purchasing of assets or expenditures concerning private pursuits for personal use through their business or related entities and claiming input tax credits they are not entitled to claim.

Superannuation
– SMSF’s acquiring assets but applying them to the benefit of the fund’s trustee or beneficiaries.

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Understanding various kinds of super fees

February 16, 2018

No matter the kind of superfund you opt for, you will be subject to super fees. Understanding how these fees work and the difference they can make to your next egg is vital.

When it comes to superfund fees, there are two factors you need to get your head around; the kinds of fees you are being charged and the rate of fees you pay. Opting for a superfund based on these two factors can see you retire with hundreds of thousands more money.

You should be aware of the various types of fees you are being charged. If you would like to find out the fees you are being charged, you should do two things. Firstly, Google your fund’s product disclosure statement and scroll through to the fees section. You should see a list of different types of fees, with an explanation of what they are, how they are applied, and how often they will be incurred. Secondly, you should log in to your superfund account and take note of all the fees being charged to you. Investigate how closely these correspond and correlate with the product disclosure statement.

If you feel there are discrepancies, do not hesitate to contact your superfund or financial advisor and ask for clarification. It is worthwhile doing your research and comparing the fees you are being charged against other super funds and what they charge. Being complacent and not paying attention to your super is extremely irresponsible; the dividends you will receive later in life for being diligent now outweighs the burden of taking time to be informed today.

Some of the common super fees across the board include:

Another major factor contributing to how much you accumulate in your super account throughout your working life is the rate of fees you pay. Plain and simple, some funds offer much lower fees than other, creating a difference of hundreds of thousands of dollars when it comes time to retire.

Generally, funds are categorised into three groups; low super fees, medium super fees and high super fees. Ultimately, you want to be in a fund that charges low super fees. In saying this, it’s not only about super fees, as some funds have medium-high super fees but also perform better based on investment strategy, meaning you will get more back from your investments.