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Penalty relief for taxpayers

From 1 July 2018, the Tax Office is advising Australians that if they find an error in their tax return or activity statement they will not incur a penalty but will advise of the error and how to get it right next time.

Penalty relief will only apply to eligible taxpayers or entities (i.e., turnover of less than $10 million) every three years.

These may include:
– Small businesses
– Co-operatives
– Self-managed super funds (SMSFs)
– Not-for-profit organisations

Eligible individuals will only be given penalty relief on their tax return or activity statement if they make an inadvertent error because they either:
– took a position on income tax that is not reasonably arguable, or
– failed to take reasonable care

The ATO will not provide penalty relief when individuals have (in the past three years):
Received penalty relief
– Avoided tax payment or committed fraud
– Accrued taxation debts with no intention of being able to pay (i.e., phoenix activity)
– Previously penalised for reckless or intentional disregard of the law
– Participated in the management or control of another entity which has evaded tax.

Individuals can not apply for penalty relief. The ATO is reminding individuals that they will provide relief during an audit should it apply.

Penalty relief will not be applied to:
– Wealthy individuals and their businesses
– Associates of wealthy individuals (that may be deemed a small business entity in their own right)
– Public groups, significant global entities and associates

Penalty relief will also not be applied to certain taxes, i.e., fringe benefits tax (FBT) or super guarantee (SG).

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News

Tax on super death benefits for dependants vs non-dependants

July 9, 2020

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:

Dependants will not have to pay tax on the tax-free component of their super in the event that they:

However, they will be taxed at their marginal rate if they receive a capped benefit income stream and:

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:

Non-dependants must calculate how much money in the super account is a:

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).