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Investing on arm’s length

Running a self-managed super fund requires trustees to adhere to complex laws and follow a number of onerous rules.

One of the most fundamental investment rules for SMSFs is that the trustees must transact on an arm’s length basis to ensure no conflict of interest arises. An arm’s length transaction requires trustees to conduct on a commercial basis as if there was no relationship between the parties.

This means the purchase and sale price of fund assets should always reflect the true market value of the asset, and the income from the assets held by the fund should always reflect the true market rate of return.

SMSF trustees must obtain independent valuations for assets which are not listed on a public market. Furthermore, if a SMSF sells an asset to a related party or member of the fund, the sale price must be at market value.

Any non-arm’s length income is taxed at the highest marginal tax rate. The ATO considers non-arm’s length income as income which is derived from a scheme in which the parties were not dealing with each other at arm’s length and if it is more than the SMSF might have been expected to derive (if the parties had been dealing on a arm’s length basis).

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Your First Tax Return: What You Need To Know

June 15, 2021

Tax return season is quickly approaching for individuals. You may need to begin thinking about the process sooner rather than later to ensure that you have everything ready for your accountant. If you’ve never had to complete a tax return before (and it’s your first time) or are still uncertain about what you need to do, this process can feel a bit like a Mount Everest you need to climb.

Putting it simply, if you are earning or will earn more than $20,542 this year, you will need to lodge a tax return. However, if you haven’t made that amount but your employer has taken tax out of your pay, you should lodge a return anyway to receive some (if not most) of that money back.

How much money you receive back from the tax return will be affected by how much income you have earned. Some debts (such as HECS or HELP) will begin to take money out of your return after reaching a certain income threshold level (currently set at $46,620).

A tax return is where you report all of your income earned over the past financial year. It should include ATO-reported income (which you generally won’t have to worry about as we have access to it automatically) such as salary or non-ATO reported income. This income may be income that has not been sent to the ATO and could include tips, any income you’ve earned while working under an ABN or payments from a family trust. You need to work out all of the income that you have earned and report it to remain compliant with the ATO.

In a tax return, you will also be entitled to make tax deductions on certain items if they apply to your situation. This means that you may receive a greater amount in your tax refund.

You will be entitled to tax deductions on items such as:

If you want to make sure that you understand precisely what you need to do to lodge your tax return, keep this in mind:

For assistance during the lodgement of your tax return, you can seek advice from us. We’re here to help ensure you meet your tax obligations by reporting your income correctly for this financial year.