Tax Law - Case #1 Director of Publicly Listed Company - Offshore Assets - Executive shares and options - Investor/Trader - Income or Capital Gain on disposal - OVDI
Date: April 27, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
This matter involved the distinction between payment of income tax or a capital gain on disposal of the securities.
Tax Law - Case #2 - Property - Joint Tenants - CGT - Deductions
Date: April 27, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
Two individuals bought property in Australia in spite of the fact that the entire amount was paid by one individual
Tax Law - Charities and tax(Part 1)
Date: March 05, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
Charities of various types get major tax concessions, as is well known. The issue of identifying a charity therefore is of great importance in tax law. This article covers the issues in a recent ATO ruling which deals with the identification of charities.
Tax Law - Charities and tax(Part 2)
Date: March 05, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
Part 1 of this article dealt with how charities are treated for tax purposes, and the process of getting an ATO endorsement. Parts 2 and 3 of this article will look at how “charitable” is defined for tax purposes.
Tax Law - Charities and tax(Part 3)
Date: March 05, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
This final part of this article will look at controversial areas of defining “charitable purpose”.
Tax Law - Residency and FBT
Date: February 27, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
This article deals with the often-overlooked question of the effect of residency of employees upon FBT liability
Tax Law - Housing Fringe Benefits(Part 1)
Date: February 27, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
This article deals with various issues that arise in respect of housing fringe benefits. Part 1 of this article deals with housing fringe benefits generally, while part 2 of this article will deal with exempt housing benefits. Note that benefits that constitute a living away from home allowance (LAFHA) is dealt with in our companion article on that topic.
Tax Law - Housing Fringe Benefits(Part 2)
Date: February 27, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
This article deals with various issues that arise in respect of housing fringe benefits. This part of the article deals with concessions and exemptions in respect of housing fringe benefits.
Tax Law - Remote area reductions
Date: February 27, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
As discussed in our companion article on Housing fringe benefits, remote area housing benefits can be exempt from FBT. This article will look at the reductions in fringe benefit taxable value that can also apply where the benefit relates to remote areas.
Tax Law - Exempt or rebatable employers
Date: February 27, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
This article deals with the subject of non-profit employers who receive exemptions or rebates for FBT purposes. Since employers are the entities that report and pay FBT, it is vital for the employer to determine accurately whether they are eligible for such concessional treatment.
Tax Law - Paying FBT
Date: February 23, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
This article deals with various issues relating to how FBT is calculated and paid. The article covers the rate of FBT, taxable value, grossing up and how FBT interacts with income tax and GST.
Tax Law - Debt waiver fringe benefits
Date: February 23, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
This article deals with debt waiver fringe benefits, under which the employer waives part or the whole of an employee’s debt. We will cover the taxable value of this form of benefit, as well as some issues over definition.
Tax Law - Reporting fringe benefits
Date: February 23, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
This article covers the reporting requirements of FBT. It covers the definition of excluded benefits as well as the requirements for payment summaries.
Tax Law - Recording fringe benefits
Date: February 23, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
This article deals with the compliance requirements upon employers to record relevant fringe benefits adequately. This covers general record keeping as well as more specific topics.
Tax Law - Loan fringe benefits (Part 1)
Date: February 23, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
One of the more common fringe benefits is a loan fringe benefit. Identifying when such loans have arisen, and working out the taxable value of the benefit provided, can be surprisingly complicated. This part of the article will deal with identifying when a loan fringe benefit has arisen.
Tax Law - Loan fringe benefits (Part 2)
Date: February 23, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
The first part of this article dealt with defining a loan fringe benefit in unusual situations. This second part of the article will deal with how loan fringe benefits are valued.
Tax Law - Expense Payment fringe benefits
Date: February 23, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
A common form of fringe benefit is the expense payment fringe benefit, where one party reimburses expenses incurred by an employee. This article looks at how FBT treats expense payment fringe benefits.
Tax Law - Airline transport fringe benefits (Part 1)
Date: February 23, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
A classic form of fringe benefit is the provision of air travel to employees. For the most part, such fringe benefits will be covered by residual fringe benefits. However, in certain circumstances airline transport benefits to employees of airlines, or their associates, have to be treated under a special FBT regime.
Tax Law - Airline transport fringe benefits (Part 2)
Date: February 23, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
Part 1 of this article dealt with how to value airline transport fringe benefits. This part will deal with consumer loyalty programs and other discounts and how they impact on taxable value.
Tax Law - FBT and Division 7A
Date: February 23, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
An oddity of the FBT Act is the exclusion from the definition of “fringe benefit” of any amount that is deemed to be a dividend to the recipient under Division 7A of the Tax Act. This exclusion gives rise to some unusual side-issues that we will look at here.
Tax Law - Child care and recreational facilities benefits
Date: February 23, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
Special FBT rules apply to exempt child care and recreational facilities benefits from the FBT regime under certain circumstances. This article deals with these exemptions.
Tax Law - Exempt commercial motor vehicle benefits
Date: February 23, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
We have already looked at car fringe benefits in another article. However, now we will look at the FBT exemption that applies to commercial vehicles.
Tax Law - Residual fringe benefits
Date: February 23, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
Residual fringe benefits were designed to catch all forms of fringe benefit that do not fall under a specific category, not even property benefits or expense payment benefits. Over the years residual fringe benefits have been subject to a process of accretion, so that many, otherwise unrelated, forms of benefit can fall under the definition.
Tax Law - Pool cars and FBT
Date: February 23, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
Pooled or shared cars are sometimes given concessional treatment for FBT reporting purposes. This article deals with the relevant rules.
Tax Law - Work related health care - FBT exemptions
Date: February 23, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
FBT exemptions apply to various forms of “benefit” that relate to occupational health in various ways. The policy reason for these exemptions is self-evident. However, this article will deal with some of the ambiguities that can arise in defining “work related health care”.
Tax Law - Promoter penalty laws(Part 4)
Date: February 22, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
Part 3 of this article dealt with the actions that may be taken against promoters of tax exploitation schemes (TESs), and looked briefly against the ability of the promoter to enter a voluntary undertaking instead of being punished. This part of the article deals with the civil penalties and statutory injunctions that may be imposed as remedies against promoters.
Tax Law - Promoter penalty laws(Part 5)
Date: February 22, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
This final part of this article deals with miscellaneous issues arising in relation to promoter penalty laws, particularly criminal law consequences of these laws.
Tax Law - Advance pricing(Part 1)
Date: February 22, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
One of the ways that the ATO can impact international transactions is through the advance pricing arrangement (APA) program, which aims to mitigate the practice of “transfer pricing”.
Tax Law - Advance pricing(Part 2)
Date: February 22, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
In part 1 of this article we saw that advance pricing arrangements (APAs) are a means by which the ATO seeks to kerb transfer pricing. This part of the article goes into more detail on the APA system.
Tax Law - Calculating GST Turnover
Date: February 22, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
The GST was introduced as an indirect, broad based consumption tax, ultimately borne by consumers but applicable based on whether the supplying entity is registered for GST. Whether a supplying entity is required to be registered for GST depends on its GST turnover.
Tax Law - Tax havens(Part 1)
Date: February 22, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
Tax havens are increasingly targeted by tax authorities throughout the world. The ATO and other tax authorities target the exploitation of tax havens by taxpayers to conceal their assets and income.
Tax Law - PAYG voluntary agreement
Date: February 22, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
PAYG withholding generally applies to employer-employee relationships, and not to wages paid to independent contractors. However, there are circumstances where an independent contractor would prefer to have amounts withheld under the PAYG system. This is where PAYG voluntary agreements come into play.
Tax Law - PAYG Withholding (Part 1 of 2)
Date: February 22, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
Although all individual taxpayers provide revenues to the government, the fact is that a substantial portion of individual income tax is not levied from the individual directly but through PAYG. This article deals with the PAYG withholding system and how it operates.
Tax Law - PAYG Withholding (Part 2 of 2)
Date: February 22, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
This part of this article deals with situations where PAYG withholding applies to payments, other than salary or wages.
Tax Law - GST and the margin scheme - An Introduction
Date: February 22, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
Where a taxable supply is of real property, the GST system permits the purchaser and seller to agree to use the so-called “margin scheme”. This is a more efficient and less time consuming method of calculating the GST on the sale.
Tax Law - Car Fringe Benefits (Part 1)
Date: February 22, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
An area of FBT that is notoriously complex and yet commonly encountered by employers, is the provision of car fringe benefits. Such benefits are fairly commonly provided, yet compliance can be difficult.
Tax Law - Car Fringe Benefits (Part 2)
Date: February 22, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
This part of the article deals with the complex valuation methods that apply to car fringe benefits.
Tax Law - GST groups (Part 1)
Date: February 22, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
The GST group is an option method by means of which multiple entities can effectively treat themselves as a single entity for GST purposes. This can provide substantial administrative savings, as well as ensuring that intra-group transactions do not have to be treated as GST taxable.
Tax Law - GST groups (Part 2)
Date: February 22, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
Part 1 of this article dealt with the basics of eligibility to form a GST group and the effects of forming such a group. This part of this article deals with some specific issues arising in relation to GST groups.
Tax Law - Meal Entertainment Fringe Benefits (Part 1)
Date: February 22, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
This article will deal with a particular form of entertainment fringe benefit in which a meal provided in respect of employment is deemed to be entertainment.
Tax Law - Meal Entertainment Fringe Benefits (Part 2)
Date: February 22, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
This part of this article deals with how the taxable value of meal entertainment fringe benefits is to be calculated.
Tax Law - LAFHA Fringe benefits(Part 2)
Date: February 22, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
This part of the article deals with the living away from home allowance (LAFHA) and the FBT exempt components of such allowances.
Tax Law - LAFHA Fringe benefits(Part 1)
Date: February 22, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
It is common for employers to pay an allowance to employees to compensate for situations where the employee is obliged to live away from home. This article deals with the living away from home allowance (LAFHA) and how FBT can apply to it.
Tax Law - FBT exemptions
Date: February 22, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
In former times, fringe benefits were a way that employers could provide incentives to employees while circumventing income tax. Provided the employee did not mind taking benefits other than money, fringe benefits could substitute for any amount of wages.
Tax Law - An introduction to the Fringe benefits tax(FBT)
Date: February 22, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
Most people who consider how employees are remunerated for employment would think first of salary and wages. However, a common – and formerly abused – form of remuneration involves the employer providing benefits to the employee other than money. The fringe benefits tax (FBT) was introduced in 1986 to kerb such usages.
Tax Law - Tax havens(Part 2)
Date: February 22, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
The previous part of this article on tax havens looked at the ATO’s stance towards tax haven abuse and the potential penalties applying. This part of the article examines the forms of dealing with tax havens that constitute abuse.
Tax Law - FBT and seminars
Date: February 22, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
One of the most confusing aspects of the fringe benefits tax (FBT) is how FBT treats seminars provided in respect of employment. This controversy is very much alive, with many employers being unsure of how to treat such events.
Tax Law - Annual compliance arrangements(Part 1)
Date: February 22, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
The ATO has always recognised the importance of large business entities to the general well-being of the Commonwealth. If nothing else, large business entities contribute no less than 60% of annual income tax revenue to the Commonwealth. Annual compliance arrangements (ACAs) are just one way amongst many for the ATO to engage with large businesses and ensure throughgoing compliance as far as possible.
Tax Law - FBT, associates and third parties
Date: February 22, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
FBT is a tax upon fringe benefits, which most people would associate with benefits other than money which employers bestow directly upon employees. However, what happens if the benefit is provided to a family member of the employee? What is the employee receives a benefit from a party other than the employer? This article deals with associates and third parties for the purposes of FBT.
Tax Law - FBT and salary sacrifice arrangements
Date: February 22, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
As described in our companion articles on FBT, salary sacrifice arrangements (SSAs) were in former times a way of rewarding employees whilst getting around income tax. While the advent of FBT in 1986 made such considerations less viable, SSAs are still common as a way of providing incentive to employees.
Tax Law - FBT nexus requirement
Date: February 22, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
Possibly the most basic question in determining whether a taxable fringe benefit exists, is whether the relevant benefit is provided “in respect of employment”. This article deals with this seemingly innocuous requirement and the complexities it hides.
Tax Law - Annual compliance arrangements(Part 2)
Date: February 22, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
Part 1 of this article set out the basics of what an annual compliance arrangement (ACA) is, and how to enter one. This part of the article will talk about what the arrangement involves during each year.
Tax Law - Debt Recovery - False or misleading statements(Part 2 of 4)
Date: January 17, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
This article deals with the ATO’s power to impose and increase administrative penalties upon unpaid tax debts, in situations where the taxpayer has made a false or misleading statement.
Tax Law - Debt Recovery - False or misleading statements(Part 3 of 4)
Date: January 17, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
This article deals with the ATO’s power to impose and increase administrative penalties upon unpaid tax debts, in situations where the taxpayer has made a false or misleading statement. This part of the article deals with “recklessness.”
Tax Law - Debt Recovery - False or misleading statements(part 4 of 4)
Date: January 17, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
This article deals with the ATO’s power to impose and increase administrative penalties upon unpaid tax debts, in situations where the taxpayer has made a false or misleading statement. This part of the article deals with “intentional disregard”.
Tax Law - Interest paid by the ATO
Date: January 17, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
It is usual to think of interest, in relation to tax related amounts, only in terms of interest payable by the taxpayer to the ATO (such as the general interest charge). However, there are limited situations where the ATO will be obliged to pay interest to taxpayers. This article deals with these situations.
Tax Law - Wine equalisation tax
Date: January 17, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
This article deals with a somewhat unusual form of taxation which applies to wholesalers of wine. The wine equalisation tax (WET) is a value based tax administered by the ATO for the "last wholesale sale" of wine, particularly grape wine products. Normally, this would be the transaction that occurs where the wholesaler sells wine to a retailer.
Tax Law - Natural disasters
Date: January 17, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
This article deals with the special dispensations that the ATO gives, for taxpayers who are affected significantly by natural disasters. Natural disasters which the ATO will deal leniently include floods, bushfires and storms. Sometimes the Commissioner will release a statement that a particular recent natural disaster will qualify for leniency, such as happened during the Queensland floods of early 2011.
Tax Law - Large business entities(Part 1)
Date: January 17, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
The ATO does not treat large business entities with the same anonymity as other taxpayers, since there are relatively few of them and they contribute a disproportionate amount to revenues. This article deals with the special rules developed by the ATO to deal with, and engage with, large businesses.
Tax Law - Large business entities(Part 2)
Date: January 17, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
The ATO does not treat large business entities with the same anonymity as other taxpayers, since there are relatively few of them and they contribute a disproportionate amount to revenues. This article deals with the special rules developed by the ATO to deal with, and engage with, large businesses.
Tax Law - Large business entities(Part 3)
Date: January 17, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
The ATO does not treat large business entities with the same anonymity as other taxpayers, since there are relatively few of them and they contribute a disproportionate amount to revenues. This article deals with the special rules developed by the ATO to deal with, and engage with, large businesses.
Tax Law - Large business entities(Part 4)
Date: January 17, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
The ATO does not treat large business entities with the same anonymity as other taxpayers, since there are relatively few of them and they contribute a disproportionate amount to revenues. This article deals with the special rules developed by the ATO to deal with, and engage with, large businesses.
Tax Law - Promoter penalty laws(Part 1)
Date: January 17, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
The ATO is desirous of maximising returns upon monies spent on tax enforcement. Thus, it can often make sense to target entities which promote tax avoidance and evasion schemes to multiple taxpayers. Targeting such entities can save the revenue from multiple acts of tax avoidance/evasion.
Tax Law - Promoter penalty laws(Part 2)
Date: January 17, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
Part 1 of this article dealt with identifying the promoter entity for the purposes of the promoter penalty laws. This part of the article deals with difficulties relating to identifying the promoter of a scheme, in the case of different forms of entity, arrangement and structure.
Tax Law - Promoter penalty laws(Part 3)
Date: January 17, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
This part of this article on the promoter penalty regime covers the actions that may be taken against promoters who are liable for penalties.
Trusts - Trust income where refund occurs etc
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
An issue that has taxed the minds of the ATO and solicitors alike is what happens to the taxable income of a trust when the amount of income is adjusted. The ATO has raised the issue at the NTLG Trusts Sub-Committee meeting of November 2010.
Trusts - Legal disability and trust distributions
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
There are three recognised forms of legal disability for the purposes of trust taxation: being a minor, being a bankrupt and being insane. Beneficiaries of all three forms of legal disability have special rules applicable to them if they become entitled to a trust distribution.
Trusts - Trustees starting to hold trust assets in own capacity
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
Trusts can be hard to comprehend, with interests in trust property manifesting themselves in the twin forms of legal and beneficial interests. This can be counter-intuitive, and tax law is no exception.
Trusts - Trusts and domestic share sales
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
Trust income for tax purposes, if the trust is an Australian resident trust, is always calculated as if the trust were a resident entity.
However, some transactions are problematic. What happens if one of the trust’s beneficiaries is a foreign resident? Such an issue arose recently before the ATO.
Trusts - Control test for public trading trusts
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
Certain forms of unit trust, known as “public trading trusts”, are treated differently for income tax purposes. This article deals with a recent ATO Interpretative Decision that dealt with whether a particular unit trust constituted a public trading trust.
Trusts - Helen Clark decision - Trusts and capital losses
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
Our companion article Trust deductions and losses part 2 dealt with the carrying forward of trust losses and restrictions applying to this. The recent High Court decision of FC of T v Helen Clark has led to some confusion over how capital loss carry forward ought to work.
Trusts - Taxation of distributions other than net trust income
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
Ordinarily amounts that a trust distributes to its beneficiaries will come from the net income of the trust. However, sometimes amounts will be distributed which did not form part of the trust’s income. This article deals with how the ATO treats such amounts.
Trusts - Division 7A and trust entitlements
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
Under Division 7A of the Tax Act, it is possible for loans made by private companies to associated entities to be deemed as dividends to the recipient (and thus subject to income tax). This article deals with an issue recently contemplated by the ATO, when the associated entity is a trust and the private company is presently entitled to amounts from the trust.
Trusts - Trusts and foreign share sales
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
Trust income for tax purposes, if the trust is an Australian resident trust, is always calculated as if the trust were a resident entity. However, some transactions are problematic. What happens if one of the trust’s beneficiaries is a foreign resident? Such an issue arose recently before the ATO.
Trusts - Disclaiming entitlements to trust income
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
It is normally possible for beneficiaries to disclaim entitlement to trust income from a discretionary trust. Such an action can give rise to unusual tax law implications, which were recently the subject of an ATO Interpretative Decision.
Trusts - Managed Investment Trusts - Part 1 of 2
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
A managed investment scheme (MIS) is a well-known investment structure frequently in use in Australia. The system permits entities to come together and contribute money in exchange for an interest in the scheme. The money is pooled together and a “responsible entity” operates the scheme independently. MISs must be registered. A managed investment trust (MIT) is a form of managed investment scheme with the investors constituting interest-holders in a trust, with the responsible entity being the trustee of the trust. This article in two parts deals with this special form of trust and recent tax law developments affecting it.
Trusts - Managed investment trusts and beneficiaries
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
Our companion article Introduction to managed investment trusts set out the definition of a managed investment trust (MIT) and the special tax treatments available. This article will deal with a specific issue that the ATO recently dealt with regarding the withholding tax concessions and whether a particular investor was an MIT’s beneficiary.
Tax Law - Cost Base(Part 1) - Costs of acquisition
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
A capital gain exists where the capital proceeds attributable to a capital event exceed the cost base of the relevant CGT asset. Capital proceeds are relatively simple to calculate. The more involved issue is the calculation of the cost base of the asset.
Trusts - Unit trusts and managed investment schemes
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
Our companion article on Public trading trusts dealt with whether a unit trust constitutes a public trading trust and therefore is taxed as a company. This article deals with another identification issue; whether a managed investment scheme constitutes a unit trust for tax purposes. This issue, too, has come up before the ATO recently.
Tax Law - Cost Base(Part 3) – Reduced cost base
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
A capital gain exists where the capital proceeds attributable to a capital event exceed the cost base of the relevant CGT asset. However, a capital loss exists where the capital proceeds are exceeded by the reduced cost base of the asset.
Tax Law- CGT Calculation(Part 2) – More about the general discount
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
As we saw in Part 1 of this article, one of the three alternative techniques for calculating capital gains on the happening of a CGT event, is the general discount method. Using this method, entities including individuals and trusts may receive up to a 50% reduction of the capital gain that would otherwise exist.
Trusts - Introduction to managed investment trusts - Part 2 of 2
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
Part 1 of this article dealt with the definition of a managed investment trust (MIT) for tax law purposes. Here we will discuss the various tax concessions that are available in respect of MITs.
Tax Law - Marital breakdown rollover(Part 1)
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
This article deals with the CGT rollovers that apply to CGT events occurring upon the breakdown of a marriage or relationship.
Tax Law - Consolidation essentials
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
Needless to say, separate income taxation of multiple entities can prove complex and costly. Complex tax administration requires resources and personnel that could otherwise be used. That said, the ATO allows wholly-owned groups to consolidate for taxation purposes. The consolidation regime is itself extremely complicated. This article sets out the basics of the regime and how it applies.
Tax Law - Involuntary disposal rollover(Part 2)
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
Part 1 of this article dealt with what an involuntary disposal is and when the CGT rollover for involuntary disposal may be claimed. This part of the article deals with the conditions of eligibility for the rollover.
Tax Law - Cost base (Part 2) - Costs of ownership
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
A capital gain exists where the capital proceeds attributable to a capital event exceed the cost base of the relevant CGT asset.
Tax Law - CGT calculation (Part 1) - Capital gains and the general discount
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
The CGT regime, brought in in 1985, was intended to bring capital amounts, which otherwise be exempt from income tax, into the taxpayer’s assessable income.
Tax Law - CGT calculation (Part 3) - Indexation
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
There are three permitted methods for calculating CGT; the standard method, the general discount method and the indexation method. The taxpayer can only use one of these methods. The previous two parts of this article dealt with the standard and general discount methods. This part will deal with the indexation method.
Tax Law - Marital breakdown rollover (Part 2)
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
This part of the article deals with the application of the CGT rollovers that apply to CGT events occurring upon the breakdown of a marriage or relationship.
Tax Law - Involuntary disposal rollover (Part 1)
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
It is well known that a variety of exemptions and rollovers can apply to taxpayer in situations where CGT would otherwise apply. This article deals with CGT rollovers upon the involuntary disposal of assets.
Tax Law - Involuntary disposal rollover (Part 3)
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
Part 1 of this article dealt with what an involuntary disposal is and when the CGT rollover for involuntary disposal may be claimed. This part of the article deals with the conditions of eligibility for the rollover.
Tax Law - CGT and death (Part 1) - Consequences of death
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
The CGT regime was introduced in 1985 to ensure that capital amounts, which were formerly largely exempt from income tax, would be brought within the income tax regime. As a general rule, net capital gains from the happening of CGT events to CGT assets of a taxpayer on or after 20 September 1985 are included in the taxpayer’s assessable income. However, there are a number of exemptions for the CGT where a taxpayer may be entitled to either full or partial exemption. This part of the article will deal with the usual CGT consequences of death, while Parts 2 and 3 will deal with the CGT exemption on inherited dwellings.
Tax Law - CGT and death (Part 3) - Joint tenancies and beneficiaries of beneficiaries
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
The CGT regime was introduced in 1985 to ensure that capital amounts, which were formerly largely exempt from income tax, would be brought within the income tax regime. As a general rule, net capital gains from the happening of CGT events to CGT assets of a taxpayer on or after 20 September 1985 are included in the taxpayer’s assessable income. However, there are a number of exemptions for the CGT where a taxpayer may be entitled to either full or partial exemption. This part of the article deals with the CGT consequences of acquiring CGT assets from a deceased estate by the operation of joint tenancies. We also look at what happens when a beneficiary of a deceased estate dies and a dwelling passes to a further beneficiary.
Tax Law - Main residence exemption - Part 1 of 3
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
CGT normally applies to capital gains that arise upon the disposal of land. To most individuals, the most important exemption applicable to this situation is the main residence exemption.
Tax Law - Main residence exemption - Part 3 of 3
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
CGT normally applies to capital gains that arise upon the disposal of land. To most individuals, the most important exemption applicable to this situation is the main residence exemption.
Tax Law - CGT exemption essentials
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
This article sets out in summary form the various available forms of CGT exemption, some of which are dealt with in more detail in companion articles.
Tax Law - CGT and Death(Part 2) – Inherited dwelling exemption
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
The CGT regime was introduced in 1985 to ensure that capital amounts, which were formerly largely exempt from income tax, would be brought within the income tax regime. As a general rule, net capital gains from the happening of CGT events to CGT assets of a taxpayer on or after 20 September 1985 are included in the taxpayer’s assessable income.
However, there are a number of exemptions for the CGT where a taxpayer may be entitled to either full or partial exemption. This part of the article, and Part 3, deal with the special CGT exemption for inherited dwellings.
Tax Law - Debt recovery - False or misleading statements
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
This article deals with the ATO’s power to impose and increase administrative penalties upon unpaid tax debts, in situations where the taxpayer has made a false or misleading statement.
Tax Law - Widely based tax disputes (Part 2)
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
This part of the article deals with the relevant powers of the senior officers of the ATO and of the Widely-Based Settlement Panel (Panel).
Tax Law - Widely based tax disputes (Part 4)
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
This part of the article deals, in more detail, with the way the Panel and ATO officers will look at the justifiability of a settlement proposal and the outcome of any previous litigation, as well as "other" relevant circumstances.
Tax Law - Main Residence Exemption – Part 2 of 3
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
CGT normally applies to capital gains that arise upon the disposal of land. To most individuals, the most important exemption applicable to this situation is the main residence exemption.
Tax Law - Widely based tax disputes(Part 1)
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
Taxation is a complex and ever-evolving field where, inevitably, oddities and contradictions arise every so often. The ATO is aware of this likelihood. Typically, a dispute over the application of tax law is between the ATO and a taxpayer over a specific tax matter. However, there are times when disputes between taxpayers and the ATO, over the same matter, happen on a larger scale. These instances are what the ATO calls as widely-based tax disputes.
Tax Law - Widely based tax disputes(Part 3)
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
This part of this article looks at the principles that the ATO uses when assessing a settlement proposal relating to a widely-based tax dispute.
Tax Law - Demerger(Part 5) – Cost base calculation
Date: January 12, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
A complicated and often misunderstood area of tax law is the CGT and dividend tax relief available in respect of demergers. A demerger occurs when a group of entities (basically, companies or fixed trusts) divides itself into multiple entities or groups in a certain way. This part of the article goes into more detail about how the interest-holders of the head entity ought to adjust the cost bases of the interests in the demerged entity they end up holding.
Trusts - Income Taxation of Trusts - Trustee Liability
Date: January 11, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
A trust is a relationship between legal entities normally requiring the trustee to act on behalf of the beneficiaries. For some purposes the trust is treated as an entity; however, trusts are technically made up of multiple entities and are taxed as such.
Trusts - Trust Income - Calculation and Administration
Date: January 11, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
As discussed in our companion articles, tax law prefers to look at a trust as separate entities, the trustees and the beneficiaries. However, tax law treats a trust as a single entity for an important purpose: calculation and administration of net trust income.
Trusts - Income taxation of trusts - The controversy over the Bamford case
Date: January 11, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
In our companion article on Trustee liability we dealt with the circumstances under which the trustee of a trust may be liable to pay income tax on trust income. This article expands on one of the biggest and most current controversies over trustee liability to income tax; the High Court decision of FC of T v Bamford; Bamford v FC of T 2010 ATC �20-170 and its confusing aftermath.
Trusts - Trust Income - CGT and specific entitlement
Date: January 11, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
For most taxpayers, net capital gains are simply included in their assessable income. However, due to various common law traditions attaching to trusts, capital gains of trusts are treated quite differently. Under common law and by usage, trustees can stream capital amounts to beneficiaries in different proportions to the distribution of income. Capital amounts were, in former times, tax free; this is obviously no longer the case, but the practice of treating net capital gains as capital amounts (most entities count them as part of their assessable income) still obtains.
Trusts - Deductions and losses - Part 2 of 2
Date: January 11, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
This article and its second part will deal with how allowable deductions apply to trusts. This first part will deal with the treatment of deductions and capital losses generally, while the second part will deal with the more vexed issue of the carrying forward of trust losses.
Trusts - Income taxation of trusts - Beneficiary liability
Date: January 11, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
A trust is a relationship between legal entities normally requiring the trustee to act on behalf of the beneficiaries. For some purposes the trust is treated as an entity; however, trusts are technically made up of multiple entities and are taxed as such.
Trust - Deductions and losses - Part 1 of 2
Date: January 11, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
This article and its second part will deal with how allowable deductions apply to trusts. This first part will deal with the treatment of deductions and capital losses generally, while the second part will deal with the more vexed issue of the carrying forward of trust losses.
Trusts - NSW stamp duty and trusts - Part 1 of 2 - Variations of trust deeds
Date: January 11, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
In our articles on taxation of trusts, we have concentrated on income tax and CGT. However, this article, in two parts, will look at the serious NSW stamp duty consequences that can attend an unwitting declaration of trust.
Trusts - Franked dividends and specific entitlement
Date: January 11, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
From 2010/11, new provisions covering the streaming of net capital gains and franked dividends of trusts were introduced. This article deals with the new tax law treatment of franked dividends received by trusts.
Trusts - NSW stamp duty and Trusts - Part 2 of 2 - Declaration of Trust in an agreement for sale
Date: January 11, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
In our articles on taxation of trusts, we have concentrated on income tax and CGT. However, this article, in two parts, will look at the serious NSW stamp duty consequences that can attend an unwitting declaration of trust.
Trusts - Forms of trust for tax and business - Part 2 of 2 - Unit and hybrid trusts
Date: January 11, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
People are often aware that different forms of trust exist, but remain unsure of which form of trust suits which purpose. Any form of trust can be used for family, investment or business purposes. Poor choices of trust will not necessarily be obvious.
Trusts - Forms of Trust for Tax and Business - Part 1 of 2 - Discretionary Trusts
Date: January 11, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
People are often aware that different forms of trust exist, but remain unsure of which form of trust suits which purpose. Any form of trust can be used for family, investment or business purposes. Poor choices of trust will not necessarily be obvious.
Trusts - Specific entitlement and delays in payment
Date: January 11, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
"Specific entitlement" is a brand new concept in trust taxation that permits streaming of net capital gains and franked dividends to beneficiaries, in proportions different from net trust income. A fundamental issue raised recently before the ATO shows that the concept is not yet fully understood or explicated.
Trusts - Trustee liability - Effect of Changes of trustee
Date: January 11, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
We have already seen in our companion article on Trustee liability the situations in which a trustee may be liable for income tax on trust income. One related issue that has been put to the ATO recently is the effect of changes of trustee upon trustee liability.
Trusts - Trust stripping
Date: January 11, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
A well-known form of tax avoidance involving trusts is the practice of “trust-stripping”. This article deals briefly with the nature of this practice and legislation designed to curb it.
Trusts - Specific entitlement and deed amendments
Date: January 11, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
"Specific entitlement" is a brand new concept in trust taxation that permits streaming of net capital gains and franked dividends to beneficiaries, in proportions different from net trust income. One issue that immediately exercised the minds of many tax professionals, was whether all trust deeds in existence would henceforth have to be amended.
Trusts -Trust restructuring
Date: January 11, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
This article deals with the special CGT rollover, for trusts that restructure into companies.
Trusts - Specific entitlement and revenue losses - An anomaly
Date: January 11, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
"Specific entitlement" is a brand new concept in trust taxation that permits streaming of net capital gains and franked dividends to beneficiaries, in proportions different from net trust income. This article deals with a bizarre anomaly in the new provisions, which involves how revenue losses are set off against streamed amounts.
Trusts - Specific entitlement and the general discount - An anomaly
Date: January 11, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
"Specific entitlement" is a brand new concept in trust taxation that permits streaming of net capital gains and franked dividends to beneficiaries, in proportions different from net trust income. This article deals with an aspect of the specific entitlement rules that is causing confusion in some quarters: how the CGT general discount is to be applied.
Trusts - Specific entitlement and the two month rule
Date: January 11, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
This article deals with a seemingly minor aspect of ATO administration of specific entitlements, which could nevertheless cause serious problems.
Trusts - Colonial First State case – Net trust income
Date: January 11, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
Ordinarily, as discussed in our companion article on Net trust income, the trustee of a trust is obliged to lodge a tax return in respect of the income of the trust under Division 6 of the Tax Act. It would seem that a long-held principle of the ATO, that some trustees are exempted from this requirement, is now in serious question thanks to a recent Federal Court decision.
Tax Law - Demergers - What is a Demerger?
Date: January 07, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
A complicated and often misunderstood area of tax law is the CGT and dividend tax relief available in respect of demergers. A demerger occurs when a group of entities (basically, companies or fixed trusts) divides itself into multiple entities or groups in a certain way.
Tax Law - Demergers - Demerger Tests
Date: January 07, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
A complicated and often misunderstood area of tax law is the CGT and dividend tax relief available in respect of demergers. A demerger occurs when a group of entities (basically, companies or fixed trusts) divides itself into multiple entities or groups in a certain way.
Tax Law - Demergers - Relief for the members of the original demerger group
Date: January 07, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
A complicated and often misunderstood area of tax law is the CGT and dividend tax relief available in respect of demergers. A demerger occurs when a group of entities (basically, companies or fixed trusts) divides itself into multiple entities or groups in a certain way.
Tax Law - Demergers - relief for interest holders of the head entity
Date: January 07, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
A complicated and often misunderstood area of tax law is the CGT and dividend tax relief available in respect of demergers. A demerger occurs when a group of entities (basically, companies or fixed trusts) divides itself into multiple entities or groups in a certain way.
Tax Law - Unfair preference payment claims against the ATO
Date: January 07, 2012
Author(s): Jonathan Lim B.A., LL.B. (Hons)
This article deals with a little-known form of action that may be taken against the ATO by a liquidator – namely, an unfair preference payment claim against the ATO itself.
Self Managed Superannuation Funds (SMSF) - SMSFs and Tax Exemptions on Pension Assets
Date: December 02, 2011
Author(s): Jonathan Lim B.A., LL.B. (Hons)
Once a self-managed superannuation fund begins to pay income stream benefits (ie a pension) to any of its members, it can begin to claim a tax exemption on income earned on assets it holds that are being used to produce the pension. This article deals with the nature of this exemption and the misunderstandings that sometimes arise.
Self Managed Superannuation Funds (SMSF) - Can an SMSF Carry on a Business? Part 1 of 2
Date: December 02, 2011
Author(s): Jonathan Lim B.A., LL.B. (Hons)
An old question relating to self-managed superannuation funds (SMSFs) is whether they are permitted to carry on a business. This is the first in our two part article on the ATO’s attitude to such activities, which is ambiguous and contains many pitfalls for the unwary.
Self Managed Superannuation Funds (SMSF) - Can an SMSF Carry on a Business? Part 2 of 2
Date: December 02, 2011
Author(s): Jonathan Lim B.A., LL.B. (Hons)
In Part 1 of this article, we looked at the ATO’s general disapproval of the carrying on of businesses by self-managed superannuation funds (SMSFs). This part of the article will look at the ATO’s apparent change in attitude to this issue. However we will analyse the real effect of the ATO’s new publication and warn about how little has really changed.
Self Managed Superannuation Funds (SMSF) - SMSFs and ESS interests
Date: December 02, 2011
Author(s): Jonathan Lim B.A., LL.B. (Hons)
An employee share scheme (ESS) is a scheme under which an employer provides shares or options (ESS interests) to employees at a discount. Unfortunately, the ATO has noted many instances of employees nominating their self-managed superannuation fund (SMSF) as the acquirer of ESS interests under an ESS. While employees may generally nominate another party as the acquirer of ESS interests, nominating the SMSF gives rise to serious issues, as we shall see.
Self Managed Superannuation Funds (SMSF) - SMSFs and Rectifying In-house Asset Breaches
Date: December 02, 2011
Author(s): Jonathan Lim B.A., LL.B. (Hons)
A non-complying self-managed superannuation fund (SMSF) is open to all sorts of penalties. However, there is often some leeway for breaches, provided action is taken quickly. This article deals with the rectification of a breach of the in-house asset rule.
Self Managed Superannuation Funds (SMSF) - SMSFs and Personal Injury Liability
Date: December 02, 2011
Author(s): Jonathan Lim B.A., LL.B. (Hons)
It may seem obvious, but self-managed superannuation funds (SMSFs) can be liable in their own right to personal injury litigation. Liability for personal injury caused by faults in property will normally fall under the tort of negligence. Under tort law, property owners have a common law duty of care to all individuals on their premises. If the required standard of care is not met, and injury occurs to the tortfeasor in a reasonably foreseeable manner, then the property owner is liable for negligence.
Self Managed Superannuation Funds (SMSF) - Insurance and SMSFs
Date: December 02, 2011
Author(s): Jonathan Lim B.A., LL.B. (Hons)
In our article entitled SMSFs and personal injury liability we discussed the idea of a self-managed superannuation fund (SMSF) obtaining public liability insurance to protect itself against personal injury claims. In this article, we will discuss forms of insurance that the SMSF can obtain over its members. This can include life insurance, disability insurance and trauma insurance. The effect of such insurance upon the SMSF has been the subject of recent debate.
Self Managed Superannuation Funds (SMSF) - Borrowing a New Amount to Repair an SMSF Instalment Warrant Asset
Date: December 02, 2011
Author(s): Jonathan Lim B.A., LL.B. (Hons)
An issue raised before the ATO very recently is whether a self-managed superannuation fund (SMSF) is permitted to borrow a new amount to repair an instalment warrant asset it already holds. As we have discussed in previous articles, an SMSF is generally prohibited from borrowing money. However, an exception is available for limited recourse borrowing arrangements (better known as instalment warrants) in which the SMSF borrows money to pay for an asset that is held in a property trust and only transferred to the SMSF when the amount is paid off.
Self Managed Superannuation Funds (SMSF) - Stepchildren and SMSF Death Benefits
Date: December 02, 2011
Author(s): Jonathan Lim B.A., LL.B. (Hons)
The rules applicable to self-managed superannuation funds have restrictions on who can receive cashed out member benefits. One rule is that member benefits may be cashed in favour of a member’s dependants, if the member dies. One issue that has been raised recently is whether the ATO would accept a stepchild as the dependant of its step parent if its natural parent dies first or the pair divorce. This is apparently an issue that has already come up quite often in Australia.
Self Managed Superannuation Funds (SMSF) - In-specie Payments by an SMSF
Date: December 02, 2011
Author(s): Jonathan Lim B.A., LL.B. (Hons)
It has always been accepted that a self-managed superannuation fund (SMSF) can make lump sum payments in specie. What is not so clear is what happens when a lump sum is paid as a commutation of part of a superannuation income stream. This issue, which has sometimes arisen in the past, has been brought recently before the ATO.
Self Managed Superannuation Funds (SMSF) - Partial Lease by an SMSF of an In-house Asset
Date: December 02, 2011
Author(s): Jonathan Lim B.A., LL.B. (Hons)
It is well-known that an exception to the restriction on in-house assets held by a self-managed superannuation fund (SMSF) is the real property exception, under which the property is leased to a member or related entity for business purposes. One issue that has arisen recently is what happens when the in-house asset is only partially leased.
Self Managed Superannuation Funds (SMSF) - New Guidance for SMSF Instalment Warrants
Date: November 28, 2011
Author(s): Jonathan Lim B.A., LL.B. (Hons)
New draft ATO guidance is now available for the use of instalment warrants by self-managed superannuation funds. The instalment warrant system (officially “limited recourse borrowing arrangements”) permits SMSFs to borrow money, under restricted circumstances, to acquire an asset. However, many SMSFs attempting, or claiming to attempt, to use the instalment warrant system honestly, have been in breach of the rules, hence the new guidelines (Draft SMSF Ruling SMSFR 2011/D1, released September 2011).
Self Managed Superannuation Funds (SMSF) - Recording SMSF Contributions
Date: November 28, 2011
Author(s): Jonathan Lim B.A., LL.B. (Hons)
The Commissioner of Taxation has taken advantage of two recent cases before the Administrative Appeals Tribunal (AAT) to emphasise the importance of proper record-keeping by self-managed superannuation funds (SMSFs). He also emphasized the duty tax agents have to ensure that client SMSFs are not financially disadvantaged.
Self Managed Superannuation Funds (SMSF) - Excess Contributions Tax – Release Authority
Date: November 28, 2011
Author(s): Jonathan Lim B.A., LL.B. (Hons)
If an individual makes contributions to his or her self-managed superannuation fund (SMSF) and these contributions exceed the caps relevant to that type of contribution, then the individual may be liable to excess contributions tax (ECT).
Self Managed Superannuation Funds (SMSF) - Income Streams – When They Start
Date: November 28, 2011
Author(s): Jonathan Lim B.A., LL.B. (Hons)
When a member of a self-managed superannuation fund (SMSF) satisfies a condition of release, he or she may be eligible for an income stream benefit from the SMSF. When a member is receiving an income stream of this sort, it can be highly relevant for tax purposes (both for the member and the SMSF) to determine exactly when the income stream commences and ceases. The ATO has just released draft guidelines on how to determine these times (Draft Taxation Ruling TR 2011/D3).
Self Managed Superannuation Funds (SMSF) - Losses on Disposal of Shares
Date: November 28, 2011
Author(s): Jonathan Lim B.A., LL.B. (Hons)
A self-managed superannuation fund (SMSF) is generally discouraged from engaging in business. Although the ATO and Parliament have failed to make any binding statements on this point, it is fairly clear that they expect this point to be followed. A related issue that has clearly been vexing the Government and the ATO in recent times has been that of the treatment of SMSF share sale losses.
Self Managed Superannuation Funds (SMSF) - SMSFs and Non Arm's Length Income
Date: November 28, 2011
Author(s): Jonathan Lim B.A., LL.B. (Hons)
A self-managed superannuation fund (SMSF) is concessionally taxed at a very low rate. There is naturally a temptation in some quarters to exploit this fact by using an SMSF to help split income. However, the ATO has recently warned that the widespread abuse of an SMSF in this manner, whether the members believe it to be legal or not, is not in accordance with the law.
Self Managed Superannuation Funds (SMSF) - Winding Up an SMSF
Date: November 28, 2011
Author(s): Jonathan Lim B.A., LL.B. (Hons)
There comes a time in many instances when a self-managed superannuation fund (SMSF) must be wound up. Yet the Commissioner has recently warned that winding up procedures are frequently not being followed by SMSF trustees. In essence, the task of the SMSF trustee when winding up the SMSF is: to deal with all of the SMSF’s assets so that none remain; and to complete all administrative obligations.
Self Managed Superannuation Funds (SMSF) - SMSF Auditors
Date: November 28, 2011
Author(s): Jonathan Lim B.A., LL.B. (Hons)
Every self-managed superannuation fund (SMSF) is required to arrange an annual audit of its accounts, statements and compliance. Audits must be carried out by an “approved auditor”. The SMSF trustee appoints an approved auditor every year and must provide the auditor with all documents needed for the audit. All audits must be in writing and highlight any important issues that may arise.
Self Managed Superannuation Funds (SMSF) - Early Release Schemes
Date: November 25, 2011
Author(s): Jonathan Lim B.A., LL.B. (Hons)
For several years now, the Commissioner of Taxation has been making public his disapproval of schemes that illegally promise the early release of self-managed superannuation fund (SMSF) benefits. These types of scheme apparently have not disappeared, for the Commissioner has once more targeted them in his 2011-12 compliance program for SMSFs. Indeed, this year it would be wise for all SMSF trustees to familiarise themselves with the nature of this common and potentially disastrous form of illegal scheme.
Tax Law - Tax Debts - Personal Liabilities of Directors for Company Tax Debts
Date: October 24, 2011
Author(s): Jonathan Lim B.A., LL.B. (Hons)
In most situations where a company has a tax debt, the Commissioner of Taxation and the ATO will respect the “corporate veil” and not touch the assets or money of the individual directors or shareholders.
Tax Law - Tax Debts - Writs and Warrants of Execution
Date: October 24, 2011
Author(s): Jonathan Lim B.A., LL.B. (Hons)
A writ or warrant of execution (hereafter “warrant”) is issued by a court to authorise its sheriff or bailiff to seize assets of the judgment debtor and sell it to pay the judgment debt amount.
Tax Law - Tax Debts - Irrecoverable Debts
Date: October 24, 2011
Author(s): Jonathan Lim B.A., LL.B. (Hons)
The ATO can sometimes seem to have boundless energy when pursuing tax debts. However, it is important for taxpayers to be aware of the situations when even the ATO will give up the chase.
Tax Law - Tax Debts - Paying by Installments
Date: October 19, 2011
Author(s): Jonathan Lim B.A., LL.B. (Hons)
The ATO expects taxpayers to pay taxes when they fall due. Ordinarily this puts the onus on the taxpayer to ensure that their cash flow is always adequate to their tax related responsibilities.
Tax Law - General Interest Charge or GIC
Date: October 19, 2011
Author(s): Jonathan Lim B.A., LL.B. (Hons)
The ATO has several means of discouraging the late payment of tax liabilities. Of these, the most basic and universally applied is the general interest charge (GIC).
Tax Law - Tax Debts - The ATO can Bankrupt you
Date: October 19, 2011
Author(s): Jonathan Lim B.A., LL.B. (Hons)
There are many ways in which the ATO and the Commissioner of Taxation can impose sanctions upon individual taxpayers who are late in paying tax liabilities. Of these, the most severe sanction is that of bankruptcy under the Bankruptcy Act 1966 (Cth).
Tax Law - Tax Debts - Liquidation
Date: October 19, 2011
Author(s): Jonathan Lim B.A., LL.B. (Hons)
When the ATO and Commissioner of Taxation decide to impose measures upon a company taxpayer with a tax debt, the most extreme sanction available is that of liquidation. As can be imagined, this harsh measure is not imposed lightly.
Tax Law - Tax Debts - Bankruptcy and Liquidation Factors
Date: October 19, 2011
Author(s): Jonathan Lim B.A., LL.B. (Hons)
In our companion articles Tax debt recovery: bankruptcy and Tax debt recovery: liquidation, we already discussed the basics of when the Commissioner will impose these harsh measures. However, an important issue for a taxpayer who is subject to these measures is what factors the Commissioner takes, or should take, into account when deciding to impose them.
Tax Law - Tax Debts - Company Arrangements in Lieu of Liquidation
Date: October 19, 2011
Author(s): Jonathan Lim B.A., LL.B. (Hons)
As may be seen in our companion articles Tax debt recovery: liquidation and Tax debt recovery: bankruptcy and liquidation factors, the Commissioner of Taxation will only seek liquidation of a debtor company in extreme circumstances. This article deals with ATO policy when choosing to enter a deed of company arrangement with a debtor company, as an alternative to imposing liquidation.
Tax Law - Tax Debts - Indemnity Requests upon Liquidation or Bankruptcy
Date: October 19, 2011
Author(s): Jonathan Lim B.A., LL.B. (Hons)
When a tax debtor is subject to bankruptcy or liquidation, either a trustee or liquidator will take over the taxpayer’s assets and undertake to pay the debts of the taxpayer as best as possible. These debts include debts to the ATO as well as other debts. The trustee or liquidator will often find itself in a situation where a certain action, such as litigation, will result in more funds being available to pay creditors.
Tax Law - Tax Debts - Compromise of Tax Debts
Date: October 19, 2011
Author(s): Jonathan Lim B.A., LL.B. (Hons)
If the Commissioner accepts an application from a tax debtor to compromise their tax debt, then the Commonwealth will accept a payment that is lower than the full tax debt. Applying for a compromise is often the first thing a tax debtor will think of if an outstanding tax debt cannot be paid. However, as will be seen, it is not a very desirable solution.