Trust distribution assessable for tax despite the beneficiary’s lack of knowledge and disclaimer

Trust distribution assessable for tax despite the beneficiary’s lack of knowledge and disclaimer

In Alderton and Commissioner of Taxation (Taxation) [2015] AATA 807 (16 October 2015), the Administrative Appeals Tribunal (AAT) upheld the Commissioner’s decision to assess a trust beneficiary to tax on a distribution from the trust, despite her attempted disclaimer in November 2014 of “the entirety of any interest accrued by her in the past or which may accrue in the future in the income or corpus of the trust fund”, with such disclaimer to take effect from the date of settlement of the trust.

Sladen Snippet - Division 7A and Tax Consolidated Groups TD 2015/18

Sladen Snippet - Division 7A and Tax Consolidated Groups TD 2015/18

Division 7A of the Income Tax Assessment Act 1936 can operate to deem a dividend to be paid by a private company that is a subsidiary member of an income tax consolidated group (subsidiary).

If a subsidiary makes a loan to a shareholder (of the Head Company of the tax consolidated group) or their associate in a manner that evokes the application of the “deemed dividend” provisions in s 109D, the relevant time for complying with the Division 7A provisions would be the “lodgment day” of the Subsidiary’s income tax return for the relevant financial year (s 109D(1)(b)) – however, a Subsidiary member of a tax consolidated group is not required to lodge an income tax return.

Sladen Snippet – Australian-owned private companies exempt from public disclosure taxation rules

Sladen Snippet – Australian-owned private companies exempt from public disclosure taxation rules

Australian-owned private companies are now exempt from public disclosure taxation rules, as the Tax and Superannuation Laws Amendment (Better Targeting the Income Tax Transparency Laws) Bill 2015 (the Bill) passed through the Senate yesterday.

The Bill amends the Taxation Administration Act 1953 to exempt Australian-owned private companies from the requirement that the Commissioner of Taxation publish information about a corporate tax entity with a total income equal to or exceeding $100 million for an income year.

Deficient valuations: Tax penalties for false or misleading statements – are you liable?

Deficient valuations: Tax penalties for false or misleading statements – are you liable?

The Australian Taxation Office (ATO) has published guidance on penalties that could apply for deficient valuations. Valuations for income tax purposes of assets such as real property, shares in companies and units in unit trusts, are relevant in a number of contexts, including the capital gains tax provisions, the maximum net asset value test, the market value substitution rule, the GST Margin Scheme, and for assets held in self-managed superannuation funds.

The ATO warns that taxpayers who undertake their own property valuations or use valuations from unqualified people may be liable to pay administrative penalties where the valuations later prove to be deficient.

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Transferring Real Estate In and Out of SMSFs

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Transferring Real Estate In and Out of SMSFs

Real property is a popular investment for SMSFs (self managed superannuation funds). However, there are a number of unique issues that come with SMSFs receiving, holding and disposing of real estate. In this paper I have examined a number of those issues in great detail.

Do trustees no longer have unlimited assessment periods?

Do trustees no longer have unlimited assessment periods?

In June 2015, an article written by Sladen Legal's Sam Campbell titled "Do trustees no longer have unlimited assessment periods?" was published in the Tax Institute’s Journal, Taxation in Australia.

This article discusses whether a new law administration practice statement will give trustees comfort that the Australian Taxation Office will not issue an assessment outside of the normal 2/4 year periods.

Read the published article.

Draft exposure legislation regarding ‘look-through’ CGT treatment to earnout arrangements released by Treasury

Draft exposure legislation regarding ‘look-through’ CGT treatment to earnout arrangements released by Treasury

The Treasury has finally released long awaited draft exposure legislation regarding ‘look-through’ CGT treatment to earnout arrangements (Draft Bill).

On 12 May 2010, the former Assistant Treasurer, Senator the Hon. Nick Sherry disseminated a media release announcing the previous Government’s intention to amend the law to provide look-through capital gains tax (CGT) treatment for qualifying earnout arrangements entered into as part of the sale of business assets.

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More good news for start-ups and entrepreneurs

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More good news for start-ups and entrepreneurs

On 6 May 2015, the Honourable Joe Hockey with the Honourable Bruce Billson disseminated a media release on Supporting start-ups and entrepreneurship. 

The media release announces new measures which will apply to small business and start-ups proposed to take effect from 1 July 2016.  These new measures will provide much needed relief for small business and start-ups and are another step towards ensuring that Australia provides the right environment for small business, start-ups and entrepreneurs.

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Sladen Snippet - Dividend access share arrangement did not affect access to CGT Small Business Concessions

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Sladen Snippet - Dividend access share arrangement did not affect access to CGT Small Business Concessions

The Administrative Appeals Tribunal (AAT) has held that the existence of a dividend access share (DAS) arrangement did not affect the taxpayer’s ability to apply the capital gains tax (CGT) small business concessions to a capital gain arising from the disposal of ordinary shares in the applicant company.

The primary issue considered in this case was whether the existence of the DAS caused the required small business participation percentage (SBPP) of 90% to be failed.

Sladen Snippet – ATO alert - transfers of shares in private companies to an SMSF could be treated as dividend stripping

Sladen Snippet – ATO alert - transfers of shares in private companies to an SMSF could be treated as dividend stripping

On 1 May 2015, the Australian Taxation Office (ATO) issued a Taxpayer Alert (TA 2015/1) in relation to dividend stripping arrangements involving the transfer of private company shares to a self managed superannuation fund (SMSF).

These arrangements essentially involve a private company with accumulated profits paying franked dividends to a new SMSF shareholder and the original shareholders benefitting as members of the SMSF from franking credit refunds to the SMSF. This could include, for example, the transfer by a member to their SMSF of shares in a corporate beneficiary that holds retained earnings sourced from trust distributions.

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Sladen Snippet - Charities: the importance of complying with regulatory obligations

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Sladen Snippet - Charities: the importance of complying with regulatory obligations

Charities have a number of ongoing reporting obligations, including the requirement to submit an Annual Information Statement (AIS) and annual financial report to the Australian Charities and Not-for-profits Commission (ACNC).

The reporting requirements depend on the size of the charity:

  • A small charity (which has annual revenue of less than $250,000) must submit an AIS and can choose to submit a financial report.
  • A medium charity (which has annual revenue of $250,000 or more, but less than $1 million) must submit an AIS and a financial report that is either reviewed or audited.
  • A large charity (which has annual revenue of $1 million or more) must submit an AIS and an audited financial report.

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Director’s breach of fiduciary duties results in a clawback of super contributions

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Director’s breach of fiduciary duties results in a clawback of super contributions

The decision of the Victorian Court of Appeal in Australasian Annuities Pty Ltd (in liq) v Rowley Super Fund Pty Ltd 1 (Rowley Super) concerns the ability of a liquidator to claw back contributions made to a superannuation fund where such contributions are made as a result of a director breaching his fiduciary duties to the corporate trustee of a discretionary trust.

Tax disputes - what not to do

Tax disputes - what not to do

Our previous article Tax disputes – what to do discussed some of the general stratagems taxpayers can employ when in dispute with the Australian Taxation Office (ATO).

As previously highlighted, quick and early professional advice, assessment of the nature and extent of a dispute and engagement with the ATO can lead to better ultimate outcomes.

Similarly, there are certain things that a taxpayer in dispute with the ATO should not do

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Sladen Snippet – Unit trusts and capital gains tax concessions

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Sladen Snippet – Unit trusts and capital gains tax concessions

The Australian Tax Office (ATO) has issued ATO Interpretative Decision (ATO ID) 2015/8 providing further guidance to trustees of unit trusts seeking to satisfy the basic conditions for access to the capital gains tax (CGT) small business concessions.

The ATO ID states where the trustee of a unit trust has the power to accumulate income, that does not of itself cause the unit trust to fail the fixed trust tests relevant for the purposes of calculating an entity’s small business participation percentage in the trust (item 2 of the table in subsection 152-70(1) of the ITAA 1997).

New ATO online resource dedicated to privately-owned groups and wealthy individuals

New ATO online resource dedicated to privately-owned groups and wealthy individuals

On Thursday 19 March the Australian Taxation Office (ATO) released their program blueprint “Reinventing the ATO”. The ATO stated that the blueprint describes the kind of experience that Australians expect to have when they deal with the ATO and that it will guide everything that the ATO does in the coming years.

 The ATO state that the blueprint has been in development for close to 12 months and has had input from thousands of different people involved in different market segments, members of the accounting and legal professions, other agencies and ATO staff.

Tax disputes - what to do

Tax disputes - what to do

As the old saying goes there are two certainties in life; death and taxes. Every man, woman, child and business entity in this country, whether they realise it or not, will have their day-to-day lives impacted by Australian taxation laws whether in their work, what they buy, their assets or investments, how their business operates or the cost of goods and services.

As it is the Australian Taxation Office (ATO) that administers and enforces Australian taxation laws it pays to know what to do should you ever wish to dispute a decision by the ATO. Fundamentally, if you do not agree with a decision made by the ATO in relation to your taxation liability or position you are in dispute. The real question is what are you do about any such dispute.