Sladen Snippet - $40K fine for super breaches
Sladen Snippet – when does a de facto relationship end for superannuation death benefit purposes?
Recent Tax and Regulatory Developments Affecting SMSF Audit
Sladen Legal’s Phil Broderick was recently invited to present at the Television Education Network’s 4th Annual SMSF Audit Conference. His topic was titled “Recent Tax and Regulatory Developments Affecting SMSF Audit”.
Sladen Snippet - super funds can now qualify for the primary production land tax exemption (s 67 Land Tax Act)
In in an unheralded move, the Victorian government has extended the land tax exemption for primary production land in an urban zone (contained in section 67 of the Land Tax Act 2005) to include land owned by a trustee of a super fund of which all the members or beneficiaries are relatives and at least one of those members or beneficiaries is normally engaged in a substantially full-time capacity in the business of primary production of the type carried on on the land.
Sladen Snippet – Date to fix up non-commercial LRBA loans extended to 31 January 2017
Sladen Snippet – Back to the future – public trading trust rules will not apply for super funds from 1 July 2016
Sladen Snippet – super changes in the 2016 Budget
It’s hard to know what to do with a budget handed down by a Government that will not have enough time to pass any measures before it goes into an election. Do you follow the current laws or the laws as they are proposed to be changed in the future (if the Government is re-elected and if it can pass the measures in the newly constituted parliament)? That is the situation we currently find ourselves in with the proposed super changes and in particular the lifetime non-concessional contributions cap.
Sladen Snippet – public trading trust rules here to stay? - changes lapse in Parliament.
We have previously noted in our Snippets in September and December 2015 that, under the legislation to introduce the new managed investment trust rules, it was proposed that self managed superannuation fund(s) (SMSFs) (and other exempt entities that are entitled to a refund of excess imputation credits) be excluded from the 20% tracing rule for the public trading trust rules. This would have resulted, from 1 July 2016, in the public trading trust rules not applying to unit trusts merely because a SMSF held more than 20% of the units in the trust.
Sladen Snippet - ATO gives further guidance on how related party LRBA loans can be rectified by 30 June 2016
Practical Compliance Guidelines PCG 2016/5 Income tax - arm's length terms for Limited Recourse Borrowing Arrangements established by self managed superannuation funds (Guideline) sets out further guidance as to how existing non-commercial limited recourse borrowing arrangement (LRBA) loans from related parties to self managed superannuation funds (SMSFs) can be put on commercial terms by 30 June 2016. If such loans are on commercial terms by that date and with effect for the 2015/16 year then the ATO will accept that such loans are on commercial terms and that they will not trigger the application of the non-arm’s length income (NALI) rules. The ATO has said that it will not select an SMSF for a review purely on the basis that it had a loan on a non-commercial basis for previous years.
Sladen Snippet – ATO releases safe harbour for related party LRBA loans
The ATO has released Practical Compliance Guidelines PCG 2016/5 Income tax - arm's length terms for Limited Recourse Borrowing Arrangements established by self managed superannuation funds (Guideline) which sets out 2 safe harbours for limited recourse borrowing arrangement (LRBA) loans from related parties to self managed superannuation funds (SMSFs). If such loans comply with the terms of the safe harbours then the ATO will accept that such loans are on commercial terms and that they will not trigger the application of the non-arm’s length income (NALI) rules.
Sladen Snippet – Super contribution caps, rates and thresholds for 2016/17 year released
The Australian Taxation Office (ATO) has released key super contribution caps, rates and thresholds for the 2016/17 year. These include:
- Concessional contribution caps – for persons aged less than 49 on 30 June 2016 the cap will remain at $30,000 - for persons aged 49+ on 30 June 2016 the higher cap of $35,000 will apply;
- Non-concessional contributions cap- will remain at $180,000, while the “bring forward” cap will remain at $540,000;
- CGT contributions cap - will increase to $1,415,000.
- Super guarantee maximum super contribution base- will increase to $51,620 per quarter, while the super guarantee rate will remain at 9.5%;
- Lump sum low rate cap- will increase to $195,000.
Sladen Snippet – non-commercial LRBA loans must be rectified with effect from 1 July 2015
In our previous Sladen Snippet, we confirmed that the Australian Taxation Office (ATO) will not take active steps to review non-commercial limited recourse borrowing arrangement (LRBA) loans prior to 30 June 2016, but that such LRBA loans should be put on arm’s length terms by 30 June 2016. If that occurs then the ATO has stated that it will not actively review such non-commercial LRBAs in prior years.
Sladen Snippet – concept of unit trust clarified for the public trading trust rules
The Full Federal Court has provided some welcome clarification as to what constitutes a unit trust when it upheld an appeal by the Commissioner of Taxation, in the decision of CoT v ElecNet (Aust) Pty Ltd (Trustee). In the original decision (discussed in a previous Sladen Snippet) the Federal Court found that a trust established for the purpose of assisting workers when they are retrenched was a unit trust, on the basis of the expanded definition of “unit” in the public trading trust rules.
Sladen Snippet – public trading trust rules no longer to apply for super funds - transitional rules announced
The Government has released the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Bill 2015 which, if enacted, will mean that, from 1 July 2016, the fact that self managed superannuation fund(s) (SMSFs) hold more than 20% of the units in a unit trust will not cause the unit trust to be a public trading trust.
The public trading trust rules result in a unit trust being treated as a company in certain ways (for example, it is taxed at the corporate rate and its distributions can be franked). These changes are to apply to existing unit trusts (that are public trading trusts) as well as unit trusts set up after 1 July 2016.
Sladen Snippet – Non-commercial LRBA loans must be rectified by 30 June 2016
The Australian Taxation Office (ATO) has confirmed that it will not take active steps to review non-commercial limited recourse borrowing arrangement (LRBA) loans prior to 30 June 2016.
Self Managed Superannuation Fund (SMSF) trustees are being encouraged to rectify their non-commercial LRBA loans by putting them on arm’s length terms by 30 June 2016. If that occurs then the ATO has confirmed that it will not actively review such non-commercial LRBA loans in prior years. Although not expressly stated on the ATO’s website, the ATO has indicated that such rectification does not need to be retrospective.
SMSFs and Asset Protection
When people think of self managed superannuation funds (SMSFs) they mostly think of a vehicle to provide retirement benefits and their concessional tax treatment. In contrast, the asset protection benefit provided by SMSFs is often not considered.
This topic was addressed by Sladen Legal’s Phil Broderick, who delivered a presentation on SMSFs and Asset Protection, as part of the Television Education Network’s 3rd Annual Asset Protection Conference, on 15 October 2015.
SMSFs and Real Estate Upon the Death of a Survivor
A typical Self Managed Superannuation Fund (SMSF), being the classic “mum and dad” SMSF, generally transitions pretty smoothly through the lifecycle of its members. This includes the accumulation of assets in the growth/accumulation stage and managing benefit payments through the pension stage. It also usually transitions smoothly on the death of the first with the ability to pay a death pension to the survivor.
However, there is one event that can create significant transition issues for SMSFs, being the death of the surviving spouse, particularly in instances where the fund holds lumpy assets such as real estate.
Sladen Snippet – SMSFs, unit trusts and the public trading trust rules – the end is nigh?
The draft legislation of the Government’s proposed new tax system for managed investment trusts proposes that super funds (and other exempt entities that are entitled to a refund of excess imputation credits) be excluded from the 20% tracing rule for the public trading trust rules.
Sladen Snippet - Another SMSF civil penalty case
The Federal Court has handed down another civil penalty decision for breaches by self managed superannuation fund (SMSF) trustees of the Superannuation Industry (Supervision) Act 1993 (SIS Act).
In the case of the Deputy Commissioner of Taxation (Superannuation) v Ryan [2015] FCA 1037 the Federal Court fined the two trustees of an SMSF $20,000 each for breaching the sole purpose test, the prohibition against providing members with financial assistance, the in-house asset rules and the requirement to make investments on an arm’s length basis. This was as a result of the SMSF lending to the members over $200,000. Most of these loans were never paid back to the SMSF ultimately leaving the SMSF with about $6,000 in assets. In addition, the members were disqualified as trustees.