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September 26, 2011

Portability of lost super

The Assistant Treasurer has released exposure draft amendments to allow the Australian Taxation Office to administer an electronic portability form for lost superannuation accounts.

The electronic portability form will allow members reported as lost by their superannuation funds to request the transfer of their benefits through a portal on the ATO website.

You can search for lost super here.

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Posted 26th September 2011 by David Jacobson in Superannuation, Tax

September 21, 2011

Further details of the Stronger Super reforms

The Assistant Treasurer has released an Information Pack containing further details of the Stronger Super Reforms.

Legislation is planned to be introduced in several tranches, over the coming months and in the first half of 2012.

The further information covers the following areas:

Fees
As MySuper products will have a single, diversified investment strategy, they will have to be offered at a standard set of fees generally available to all members. However, funds will be able to offer discounted administration fees to employees of particular employers, reflecting the administrative efficiencies for the fund in dealing with the employer. Any discounted fee will be reported to APRA and published by the fund. MySuper public offer funds will be able to be compared on fees.

In addition, funds will be able to offer employers with more than 500 employees a MySuper product tailored to the needs of the particular workplace including the investment strategy, member services and fees. The details of all separately tailored MySuper products will be required to be reported to APRA.

Transition
From 1 October 2013, employers must make contributions for employees, who have not chosen their fund, to a fund offering a MySuper product. All new superannuation payments will be commission free.

By 1 July 2017, funds will need to transfer the existing default balances of members to a MySuper product. However, the Government will consult further on a mechanism to allow for this period to be extended in certain, limited circumstances, recognising there may be instances where existing obligations affect a trustee's ability to transfer balances.

Consolidation
The Government will help superannuation funds and their members locate and consolidate multiple member accounts. New processes will see lost and inactive accounts, with balances under $1,000 and in eligible rollover funds, consolidated into the member's current active account, unless the member opts out. This reform will reduce the amount of fees paid on multiple accounts and maximise retirement benefits.

Reporting of contributions
Employers will disclose on payslips when contributions are due to be paid. This will provide an early warning if superannuation entitlements aren't being paid.

The use of e-commerce and data standards will enable money to be allocated to member accounts in a more timely manner and reduce the likelihood of member accounts being lost due to incomplete or incorrect information being provided to funds.

The data and e-commerce standards will be mandated for superannuation funds from 1 July 2013. The Government will extend the data and e-commerce standards to large and medium sized employers from 1 July 2014.

The information pack also discusses SMSF auditors and governance issues.

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Posted 21st September 2011 by admin in Financial Services, Superannuation, Tax

First Home Saver Account regulations

The Assistant Treasurer has released draft Corporations Amendment Regulations 2011 which set out additional information requirements that need to be disclosed within periodic statements issued to First Home Saver Account holders. Periodic statements provide account holders with details on the status of their account, including how many years of contribution are still required before they are eligible to access the funds.

Recent changes to the operation of the FHSA to provide more flexibility to account holders were made through the Tax Laws Amendment (2011 Measures No. 1) Act 2011. Subject to certain qualifying conditions, these changes now allow the account holder to use the money in the account towards their home purchase if they purchased the dwelling prior to meeting the release conditions, rather than only being able to transfer the money into a superannuation and retirement savings account.

These draft amendments amend the existing regulations to provide for reporting requirements in the periodic statement on the number of contributing years remaining on the account even where a dwelling has already been acquired.

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Posted 21st September 2011 by David Jacobson in Financial Services, Tax

August 22, 2011

Amendments to GST financial supply provisions

The Assistant Treasurer has released draft legislation for the implementation of three amendments to the GST financial supply provisions with effect from 1 July 2012.

The changes are:

  • increasing the financial acquisitions threshold input tax credit test from $50,000 to $150,000;
  • allowing small businesses that account on a cash basis to access full input tax credits upfront when they enter into hire purchase arrangements; and
  • excluding bank deposit accounts from the current special rules for borrowings.

Australian ADIs who make financial supplies consisting of a borrowing through the provision of deposit accounts will not be able to claim input tax credits for acquisitions that relate to the financial supply consisting of a borrowing, even where the borrowing relates to making supplies that are not input taxed.

Draft regulations to implement the remaining measures will be released for consultation at a later stage.

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Posted 22nd August 2011 by David Jacobson in Financial Services, Tax

August 18, 2011

Refund of excess super contributions

The Assistant Treasurer has released a consultation paper in relation to the Government's announcement of the refund of excess concessional contributions measure. Under this measure, the Government will provide eligible individuals with the option to have excess concessional contributions refunded and assessed at their marginal tax rate(s), rather than pay excess contributions tax on the amount.

Individuals who breach their concessional contributions caps by up to $10,000 for the first time will be given the option to have the excess concessional contributions refunded to them.

Excess contributions tax is incurred where an individual exceeds their concessional contributions cap. Concessional contributions include compulsory superannuation guarantee payments, salary sacrifice contributions, and other deductible contributions. Excess concessional contributions are taxed at 31.5 per cent, in addition to 15 per cent tax when contributions are made to the fund.

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Posted 18th August 2011 by David Jacobson in Superannuation, Tax

August 15, 2011

Review of the Tax File Number Guidelines

The Office of the Australian Information Commissioner (OAIC) has issued a consultation paper as part of its review of the Tax File Number Guidelines (TFN Guidelines).

The TFN Guidelines, issued under s 17 of the Privacy Act 1988 (Cth), protect the privacy of individuals by regulating the collection, storage, use, disclosure, security and disposal of tax file number information.

The OAIC is seeking comments on draft revised TFN Guidelines, guidance material and updated 'Classes of Lawful Tax File Number Recipients'.

The main aims of the OAIC's review of the TFN Guidelines are to:
•clarify the language and format of the TFN Guidelines and make them easier to read, understand and interpret;
•incorporate the advisory Commissioner's Notes into either the Guidelines themselves or the accompanying guidance material to help clarify the TFN Guidelines' meaning;
•bring the terminology up-to-date, by removing or changing references to agencies that no longer exist and to legislation which has been amended or repealed;
•update definitions so that they are consistent with relevant legislation and flexible enough to capture new legislation relating to the handling of TFNs;
•maintain the existing policy intent that underlies the TFN Guidelines to protect individuals' privacy by restricting the use and ensuring the careful handling of TFNs.

The closing date for comments is Thursday 15 September 2011.

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Posted 15th August 2011 by David Jacobson in Privacy, Tax

August 11, 2011

Farm management deposit changes

The Assistant Treasurer has released for public consultation a package of exposure draft legislation, Regulations and associated explanatory materials to amend aspects of the tax laws related to farm management deposits (FMDs), and the unclaimed money provisions in section 69 in the Banking Act 1959.

Primary producers affected by applicable natural disasters who have withdrawn their FMDs within 12 months of deposit will retain concessional tax treatment under the FMD scheme, subject to conditions. Subject to the passage of the legislation, retention of concessional tax treatment will apply retrospectively to withdrawals made from 1 July 2010 to provide support to primary producers affected by the natural disasters in Australia in late 2010 and early 2011.

Other elements of the exposure draft package, which are to apply from 1 July 2012, include:

  • removal of the restriction on primary producers from holding FMDs simultaneously with more than one FMD provider;
  • more frequent and timely reporting of various statistics by FMD providers that hold FMDs to allow for better monitoring of the take-up rate and operation of the FMD scheme; and
  • ensuring that reasonable efforts will be made by FMD providers that are authorised deposit-taking institutions to contact FMD owners who have not used their FMD accounts for seven years or more, before they forward the ‘unclaimed moneys’ to the Commonwealth in accordance with section 69 of the Banking Act 1959.

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Posted 11th August 2011 by David Jacobson in Financial Services, Tax

July 18, 2011

Draft ATO determination on investment loan interest payment arrangement

Draft Taxation Determination TD 2011/D8 has been released for comment.

TD 2011/D8 states that an investment loan interest payment arrangement is capable of attracting the operation of Part IVA of the Income Tax Assessment Act 1936 (the tax avoidance provisions).

An investment loan interest payment arrangement will exhibit all or most of the features set out as follows:

(a) The taxpayer(s) own at least two properties: one property is the taxpayer(s)' residence and the other is used to derive rent ('investment property').
(b) The taxpayer(s) have an outstanding loan which was used to acquire the residence (or refinance an earlier loan used to acquire the residence) ('home loan'), an outstanding loan which was used to acquire the investment property (or refinance an earlier loan used to acquire the investment property) ('investment loan') and a line of credit or similar borrowing facility with an approved limit ('line of credit'). All three loan products are typically (but not always) provided by a single financial institution.
(c) The respective interest rates on the home loan and investment loan are typically at or about the same rate. The interest rate on the line of credit is typically (but not always) higher by a small margin (for example, 0.15%).
(d) The investment loan is typically an interest-only loan for a specified period with principal and interest repayments required thereafter, or the interest-only period may be extendable.
(e) The line of credit typically has no minimum monthly repayment obligations provided the balance remains below the approved limit. Alternatively, it may require minimum monthly repayments equal to the accrued interest.
(f) The home loan, investment loan and the line of credit are each secured against the taxpayer(s)' residence and/or investment property.
(g) The line of credit is drawn down to pay the interest on the investment loan as it falls due. Where no repayments are required on the line of credit, the taxpayer(s) do not make any repayments, which results in interest on the line of credit being capitalised and compounded. Where monthly interest repayments are required on the line of credit, the taxpayer(s) meet such repayments from their cash flows.
(h) Typically all the taxpayer(s)' cash inflows (including that which the taxpayer(s) otherwise might reasonably be expected to use to pay the interest on the investment loan) are deposited into their home loan or an 'acceptable loan account offset account',2 which has the effect of reducing the interest otherwise payable on the home loan.
(i) If the line of credit reaches its approved limit before the home loan has been repaid, the taxpayer(s) may apply to increase the limit on the line of credit in conjunction with a corresponding decrease in the available 'redraw' amount in the home loan.

The use of the line of credit to pay the interest on the investment loan results in interest on the investment loan, in effect, being capitalised and thus its payment deferred in order to enable the taxpayer(s) to repay an equivalent amount on the home loan.

Taxpayers who have entered into an investment loan interest payment arrangement have sought to claim deductions for the interest incurred on the line of credit under section 8-1 of the Income Tax Assessment Act 1997 (ITAA 1997).

The ATO concludes that if one or more of the parties that entered into or carried out the scheme did so for the dominant purpose of enabling the taxpayer(s) to obtain a tax benefit in connection with the scheme (and by using business income to pay off private debt),Part IVA applies to the scheme and the Commissioner would be entitled to determine that any deduction for the relevant interest incurred on the line of credit shall not be allowable to the taxpayer(s).

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Posted 18th July 2011 by David Jacobson in Financial Services, Tax

Public Ancillary Funds draft legislation

The Assistant Treasurer has released for public consultation an exposure draft of legislation (and explanatory material) and draft guidelines which provides a new regulatory framework for public ancillary funds.

A public ancillary fund is one of two types of ancillary trust fund that can qualify for deductible gift recipient status (DGR) status and income tax exempt status under the ITAA 1997 (the other being private funds). A public ancillary fund collects tax deductible donations from the public which they on-distribute to other DGRs that they consider to be for worthwhile causes.

The exposure draft among other things:

  • gives the Treasurer the power to make legislative guidelines about the establishment and maintenance of public ancillary funds;
  • gives the Commissioner the power to impose administrative penalties on trustees that fail to comply with the guidelines and to remove or suspend trustees of non-complying funds; and
  • defers the start date of 1 July 2011 as announced in the Budget measure of 2010-11 until 1 January 2012.

The legislative guidelines provide for improved standards of governance and accountability, ensure regular valuation of assets, clarify investment and distribution rules, and provide for a system of administrative penalties.

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Posted 18th July 2011 by David Jacobson in Charities, Tax

July 13, 2011

Tax Discount for Interest Income Discussion Paper

The Assistant Treasurer has released a discussion paper on the design and scope of the 50 per cent tax discount for interest income received by individual taxpayers announced last year.

In 2012-13, individuals will be entitled to a tax discount equal to 50 per cent on up to $500 of interest income received. From 1 July 2013, individuals will be entitled to a tax discount equal to 50 per cent on up to $1,000 of interest income received each year.

The discount will apply to interest received from deposits held with any bank, building society or credit union, as well as interest on bonds, debentures and annuity products.

The closing date for submissions is 5 August 2011.

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Posted 13th July 2011 by David Jacobson in Financial Services, Tax
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