On the 28 October 2019, The Treasury Laws Amendment (2019 Tax Integrity and Other Measures No.1) Bill 2019 received royal assent. The new tax law creates limitations for deductions related to the expenses of holding vacant land from 1 July 2019. This is likely to affect those who acquire land for investment purposes and begin developing for rental investment purposes.
The amendments will only apply to holdings on ‘vacant land’, meaning that it will not apply to any land that has a substantial and permanent structure in use or ready for use, or is a residential premise that is lawfully able to be occupied. Land is considered vacant if both of these are not true.
The changes will not apply to vacant land held by ‘excluded entities,’ which are:
Corporate tax entities.
Managed investment trusts.
Public unit trusts.
Superannuation plans other than self-managed superannuation funds (SMSFs).
Unit trusts or partnerships where all members are of the excluded entities listed above.
The law will also be inapplicable if:
Structures affected by natural disasters or similarly exceptional situation.
The land is in use or available for use in carrying on a business by the taxpayer or their affiliates, connected entities, spouse or child under 18.
The land is in use or available for use for business purposes under an arm’s length rental arrangement.
A super death benefit is the super paid after a person’s death, usually to a nominated beneficiary. These benefits are subject to different tax treatments, depending on whether the beneficiaries are dependant or non-dependant.
Superannuation death benefits will generally be received tax-free by tax dependants, who are considered to be:
A child of the deceased who is under 18 years of age,
A spouse or former spouse of the deceased,
A person who has an interdependency relationship with the deceased (e.g. if they live together or have a close personal relationship),
A financial dependant of the deceased.
Dependants will not have to pay tax on the tax-free component of their super in the event that they:
Withdraw it as a lump sum, or
Receive an account based income stream.
However, they will be taxed at their marginal rate if they receive a capped benefit income stream and:
The deceased was at least 60 years of age at the time of death
The dependent is over 60 years of age and the total of their tax-free component and taxed element exceeds their defined benefit income cap.
Not all super death benefits are subject to tax; for non-dependants, there is a taxable portion. This component is largely made up of after-tax super contributions that the deceased member has made.
Super death benefit payments are subject to tax when:
The payment is made as a result of the SMSF member passing away,
The payment is provided to a non-dependent for tax purposes,
The payment has a taxable component.
Non-dependants must calculate how much money in the super account is a:
Tax-free component,
Taxable component the super provider has paid tax on (taxed element),
Taxable component the super provider has not paid tax on (untaxed element).
The amount of tax non-dependants pay will be based on their marginal tax rate, however, this amount may be reduced by tax offsets. For the taxed element of the taxable component, the effective tax rate is your marginal tax rate of 17% (whichever is lower). For the untaxed element of the taxable component, the effective tax rate is 32% or your marginal tax rate (whichever is lower).
