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ATO provides further guidance on SMSF related party arrangements Posted on Nov 30, 2016 by editor

Tax

The ATO has provided further guidance regarding limited recourse borrowing arrangements (LRBAs) and when non-arm’s length income (NALI) rules apply to a related party LRBA. The Tax Office recently released a Taxation Determination (TD 2016/16) and updated their Practical Compliance Guideline (PCG 2016/5/) to provide further clarification concerning the circumstances where a self-managed super fund with a related party LRBA would attract a higher marginal tax rate of 47 per cent under NALI provisions. The ATO will continue to use the “safe harbour” terms for LRBAs set out in PCG 2016/15. The “safe habour” terms are designed as a safety […]

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Government passes ‘fairer’ super changes Posted on Nov 29, 2016 by editor

Super

The Australian Government has recently passed what it is calling the ‘most significant superannuation reforms in a decade’. The reforms include the introduction of a $1.6 million transfer balance cap, which places a limit on the amount an individual can transfer into the tax-free earnings retirement phase and the introduction of the Low Income Superannuation Tax Offset, which is expected to boost the retirement incomes of around 3.1 million low income earners. Under the confirmed changes, which will come into effect on 1 July 2017, the cap on concessional (before-tax) contributions will be decreased from $30,000 (for those under the […]

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Succession planning for SMSFs Posted on Nov 23, 2016 by editor

Super

A mandatory component of managing a self-managed super fund (SMSF) is planning out what will happen to the fund if its trustee was to pass away. While succession planning may not be one of the first responsibilities that comes to mind when managing an SMSF, it is a necessity that can provide certainty and peace of mind for a deceased trustee’s family. It is also especially important in cases where one trustee, for example, a husband, takes a more active role in the management of an SMSF than his wife and fellow trustee, and wants to reduce any potential burdens […]

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ATO crackdown on trusts Posted on Nov 23, 2016 by editor

Tax

The ATO is currently targeting contrived trust arrangements that minimise tax by creating artificial differences between the taxable net income and distributable income of closely held trusts. Arrangements where trustees are engineering a reduction in trust income to improperly gain favourable tax breaks or pay no tax at all are being targeted by the Tax Office. Trustees of these arrangements exploit the differences to have the net income assessed to individuals and businesses that pay little or no tax and allow others to enjoy the economic benefits of the net income free-of-tax. The ATO identified these arrangements through ongoing monitoring […]

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The benefits of using a re-contribution strategy Posted on Nov 15, 2016 by editor

Super

A re-contribution strategy involves withdrawing your superannuation and re-contributing it back into the fund as a non-concessional (after-tax) contribution. It is an easy strategy to implement and can provide significant tax savings for a trustee and their family in the future. This is because the strategy converts the taxable portion of the withdrawn super amount into tax-free components, therefore reducing the amount of tax payable when the person’s superannuation is passed onto their beneficiaries when they pass away. However, this strategy is only available to those who have met a condition of release to access their superannuation and are eligible […]

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Income tests for tax offsets Posted on Nov 15, 2016 by editor

Tax

Income tests are used to work out a person’s eligibility for tax offsets and benefits which can reduce the amount of tax they have to pay. The Australian Taxation Office considers various items from a person’s tax return when applying income tests. For example, a number of offsets, benefits and obligations are assessed using a family income threshold. Those who have a spouse should include the spouse’s income in the relevant section of their tax return. Below are some of the tests used to assess a person’s entitlements: Adjusted taxable income (ATI) A person’s ATI affects their entitlement to any […]

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Transition to retirement (TTR) changes Posted on Nov 8, 2016 by editor

Super

With the Federal Government’s proposed changes to the transition to retirement (TTR) pension to take effect from 1 July 2017, those with existing arrangements should review them to avoid any adverse impact on their retirement funds. Following changes in the 2016 Federal Budget, from 1 July 2017, transition to retirement (TTR) pensions will no longer receive a tax-free status on the investment earnings of pension accounts. The investment earnings will be taxed at 15 per cent for both new and existing TTR arrangements. Although the tax benefits of TTR pensions will be removed, some attractions will remain. For those who […]

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Claiming tax offsets and rebates Posted on Nov 7, 2016 by editor

Tax

Tax offsets (also known as ‘rebates’) can directly reduce the amount of tax payable on a person’s taxable income. While claiming certain tax offsets can reduce a person’s tax payable to zero, on their own, they cannot create a tax refund. Here are three common types of tax offsets some individuals are eligible to claim: Health insurance A person’s entitlement to a private health insurance rebate or tax offset depends on their income level. For those who have private health insurance: the amount of private health insurance rebate you are entitled to receive is reduced if your income is more […]

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