ATO gives 'green light' to lodges
The ATO is giving taxpayers with simple affairs the
‘green light’ to lodge their annual income tax returns.
ATO Assistant Commissioner Tim Loh said that
most taxpayers with simple affairs will find the
information they need to lodge has now been pre-filled in their tax return.
Mr Loh also reminded taxpayers that some income
may need to be manually added – for example,
income from rental properties, some government
payments or income from ‘side hustles’.
As taxpayers prepare to lodge, they should keep
‘Tim’s tax time tips’ in mind:
- Include all income: If a taxpayer picked up some extra work, e.g., through online activities, the sharing economy, interest from investments, etc, they will need to include this in their tax return;
- Assess circumstances that occurred this year: If a taxpayer’s job or circumstances have changed this year, it is important they reflect this in their claims;
- Records, records, records: To claim a deduction for a work-related expense, taxpayers must have a record to prove it.
- Wait for notice of assessment: Taxpayers should wait for their notice of assessment before making plans for how they will use any expected tax refund this year;
- Stay alert to scams: The ATO would never send taxpayers a link to log into the ATO’s online services or ask them to send personal information via social media, email or SMS.
Editor: The ATO advises that, when taxpayers lodge their own return, the due date for payment is 21 November, regardless of when they lodge, but If they use a registered agent, their due date can be much later.
Different meanings of 'dependant' for superannuation and tax purposes
On a person’s death, their superannuation
benefits can only be paid directly to one or more
‘dependants’ as defined for superannuation
purposes, unless they are paid to the deceased’s
legal personal representative to be distributed in
accordance with the deceased’s Will.
Super death benefits can be tax-free to the extent
that they are paid (either directly or indirectly) to
persons who are ‘dependants’ for tax purposes.
However, the meaning of ‘dependant’ differs
slightly for superannuation and tax purposes. For
superannuation purposes, a ‘dependant’ of the
deceased comprises:
- their spouse (including de facto spouse);
- their child (of any age);
- a person in an ‘interdependency relationship’ as defined with the deceased; and
- a person who was financially dependent on the deceased.
However, for tax purposes, a ‘dependant’ (or ‘death
benefits dependant’) of the deceased includes
their spouse or former spouse (including de facto
spouse) and only children under the age of 18.
Therefore, super death benefits generally cannot
be paid directly to a former spouse, as they are
not a dependant for super purposes.
Also, while a child of any age is a dependant for
super purposes, only children under the age of 18
are dependants for tax purposes. This means that,
while a child of any age may receive super death
benefits directly, those benefits will generally only
be tax-free if the child is under 18.
Editor: If you are thinking about estate planning
with your superannuation, please contact our office.
NALI provisions did not apply to
loan structure
The Administrative Appeals Tribunal (‘AAT’)
has held that interest income derived by a self-managed superannuation fund (‘SMSF’) as the
sole beneficiary of a unit trust was not non-arm’s
length income (‘NALI’), and so this income could
still be treated as exempt current pension income.
Luxury car tax: determining a
vehicle's principal purpose
The ATO recently explained how to determine the
principal purpose of a car for ‘luxury car tax’ (‘LCT’)
purposes (since LCT is not payable on the supply
or importation of cars whose principal purpose is
the carriage of goods rather than passengers).
Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.
During the 2015, 2016 and 2017 financial years,
the unit trust lent money through two related
entities to independent third parties who undertook
development activities, through a series of loan
arrangements.
The interest income derived by the unit trust
through these loan arrangements was distributed
to the SMSF as sole unitholder and was treated
as exempt current pension income.
Following an audit, the ATO determined that the
income was NALI, and therefore should not have
been included as exempt current pension income.
The ATO then issued amended assessments for
the relevant financial years, along with penalties.
While the AAT found that the parties were not
dealing with each other at arm’s length, it also
concluded that the income that the unit trust derived
was not more than the amount it might have been
expected to derive if the parties had been dealing
at arm’s length.
Accordingly, the relevant interest income received
by the SMSF was not NALI, and so the taxpayer’s
objections to the amended tax assessments and
penalties were allowed.
Broadly, a luxury car (i.e., a car subject to LCT) is a
car whose LCT value exceeds the LCT threshold.
However, a commercial vehicle that is not designed
for the principal purpose of carrying passengers is
specifically excluded as a luxury car.
The ATO’s new determination sets out various
factors to be considered in determining the principal
purpose of a car, as well as factors to consider
when assessing a car’s modifications.
The determination states that commercial vehicles
are unlikely to have the body types of station
wagons, off-road passenger wagons, passenger
sedans, people movers or sports utility vehicles,
and the supply of these vehicles for an amount
above the LCT threshold without LCT being paid
may well attract the ATO’s scrutiny.