Tax return tips

11 July 2020

Despite the current COVID-19 world in which we live, the procedures for completing and lodging tax returns remains pretty much the same.

So, before we sit down with you to go over your tax return, certain information will be needed. Of course these days pre-filling takes care of a lot of the “paperwork”, and if you wait until late-July or mid-August the ATO’s systems will most likely be able to provide most of the information from employers, banks, government agencies and other third parties.

We will then be able to double-check the information is correct and enter any deductions you want to claim. However to be thorough, before coming in for your tax appointment here are the sorts of information needed to enable us to complete your tax return.

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South Australia Land Tax Changes – Recent Letters

16 May 2020

In case you forgot in all the craziness and uncertainty of the past few months, changes to land tax come into effect on 30th June 2020 and many South Australians will be affected.

Revenue SA have recently begun the process by sending out letters to landholdings with both Companies and Individuals on their titles. Letters for Company’s appear to have been received by the Company either as ‘head of a Corporate group’ or as a single land holder.

The letters are an information gathering exercise to advise and confirm to Revenue SA:

  • if an Individual or a Company owns land in its own right or as a trustee of a trust (including Self-Managed Superannuation Funds);
  • if the landholder is a Company in its own right – to disclose if the Company is ‘grouped’ with any other Companies;
  • if the land is held in the following trust structures:
    • Unit Trust – If you wish to disclose the unit holders so the landholding can access the ‘general’ land tax rate;
    • Discretionary Trust – If you wish to nominate a beneficiary, so the landholding can access the ‘general’ land tax rate rather than the potentially higher trust land rates;
  • That all land has been included in your ownership (the ownership of the particular entity – not all of the land a client may hold via different entities);
  • To add any land not included;
  • To advise if land has been included incorrectly;

Important Dates

  • 3rd June 2020 or 11th June 2020 (depending on your letter) – Revenue SA has requested the forms be completed by one of these dates, to allow sufficient time to request further information from your application;
  • 31st July 2020 – is the final date to lodge the forms, assuming Revenue SA have been provided all relevant documentation and have no further questions regarding your holding otherwise penalties and interest may apply to your assessment;
  • Early October 2020 – New land tax assessments to be issued;
  • 30th June 2021 – last day to nominate a beneficiary for your discretionary trust and to advise of a unit trusts unitholders, if you want the general rate to apply for the 2020/21 & 2021/22 financial years;

Important Considerations

  • There are decisions that may need to be made, for example nominating beneficiaries for a discretionary trust and / or declaring the unit holders of a unit trust;
  • These decisions can have long lasting financial and family succession implications;

Can you help me with the letter?

Of course! Please contact your usual i2 adviser to start the process.
i2 Advisory have a client portal to attend to any registrations on behalf of our clients. Please note if you have already registered online, we cannot transfer the application to the i2 Advisory login.

I think I have a handle on it and I want do the registration myself – So what do I need to do?

Please be aware that there are currently some functionality and stability issues with the Revenue SA portal. Some applications may not be able to be completed as the functionality for certain ownerships is not yet available or unclear as to how to complete. Hopefully these will be resolved soon.

Steps common to all ownership types

  • The mail out instructs the landholder to create a login account and complete the required registration via Revenue SA online portal;
  • Confirm client details and addresses;
  • Confirm your landholdings and add any land holdings for the entity that may be missing;

Individuals or Company is trustee of a trust or SMSF

  • For a Company – Advise that the Company landholder is holding the land as trustee of a trust/SMSF;
  • For an Individual – Advise that the Individual landholder/s are holding the land as trustee of a trust/SMSF;
  • Breathe deep as you may need to dive deep into the filing cabinet;
  • Provide and upload evidence of the trust/SMSF’s ownership of land (see further details below);
  • If ownership is in a discretionary trust and you wish to nominate a Beneficiary (see further details below);
  • If ownership is in a unit trust and you wish to disclose the unit holders (this functionality does not appear to be complete on the Revenue SA portal as yet);

Evidence that the Trust or SMSF is the owner of the Property
You can provide either 1 or 2 below

  1. a copy of the Memorandum of Transfer showing the consideration was paid by the trust or on behalf of the trust
    If you do not have the memorandum of transfer you can order a copy at https://sailis.lssa.com.au/home/auth/login or if you have a friendly conveyancer, ask them;
  2. a copy of the most recently completed and lodged Tax Return for the trust, clearly showing the land as an asset of the trust;

If you cannot access a copy of the memorandum of transfer or it does not disclose the consideration being paid by the trust’ or if your tax return does not disclose the relevant details, you MUST provide a minimum of 2 other types of evidence, which may include:

  1. Memorandum of Transfer for the purchase of the land, showing “with no survivorship” or “WNS”;
  2. Title showing “with no survivorship” or “WNS”;
  3. Signed Minutes of Trust Meeting (or similar), evidencing/discussing the purchase of the land on behalf of the trust;
  4. Balance Sheet of the Trust, showing the parcel of land as an asset of the trust;
  5. Settlement Statement for the purchase of the trust, showing the purchaser (you) as a trustee of the trust;
  6. Signed Contract of Sale for the purchase of the land, showing the purchaser (you) as trustee of the trust;

It is important that evidence:

  • be provided for each parcel of land that is held on Trust; and
  • clearly state the Trust name and either the property address or Certificate of Title reference;

Evidence of the existence of the Trust

  • a copy of the original executed Deed of Trust in its entirety; and
  • a copy of each Deed of Variation, where there have been variations or amendments made to the original Deed of Trust since its execution;

Nominating beneficiaries
For a trust to access the general land tax rate rather than the higher trust surcharge rate, the trust must nominate a beneficiary.

The registration form has an option for nominating a beneficiary of the discretionary trust where the land was held prior to 16th October 2019. The reality is that you have some time to provide this information – until the 30th June 2021.

Our advice is not to rush this decision, as in the majority of cases this is a permanent and once only decision. The nominated beneficiaries must sign a statutory declaration that they agree to be nominated and understand the implications.

We suggest providing the requested information confirming the trusts ownership and existence and then seeking advice as to the implications of nominating a beneficiary. An application can be completed on this basis, with a separate application being completed at a later date nominating a beneficiary if this is applicable.

The landholder is an Individual in its own right

The landholder need only advise that the land is not held on trust and the contact details.

The landholder is a Company in its own right

For a company that holds land in its own right the process is less onerous than that of a trustee.

The Group Head is the corporation who will receive correspondence and Notices of Assessment from Revenue SA on behalf of the whole group of corporations. They are also responsible for updating and confirming the related corporations in Revenue SA Online. The corporation head has been determined as the most recently registered corporation that holds land in South Australia.

If you have received a letter as the nominated group head you can also:

  • Nominate a different corporation to complete the review of the corporate group
  • Confirm that all related corporations have been included in the corporate group
  • Add any related corporations that have not been included
  • Advise where Revenue SA have included corporations incorrectly

It is important that all related companies are included and that all land holdings have been disclosed in the registration process as penalties may apply.

Where can I find out more?

The above is our understanding as at 14th May 2020.

Further Information regarding the land tax rules and the registration process can be found at:
https://www.revenuesa.sa.gov.au/services-and-information/revenuesa-online/land-tax-reform-changes
https://www.revenuesa.sa.gov.au/taxes-and-duties/land-tax/land-tax-changes

If you would like to discuss this further, please don’t hesitate to contact your i2 adviser.

South Australian Land Tax Reform

6 March 2020

The South Australian Government has passed into law significant amendments to the land tax measures. These will come into effect from 1st July 2020 (and relate to land held as at 30 June 2020). Moving forward this will impact how land tax is calculated and while you may currently pay little or no land tax that could change with the introduction of these new laws. Though, it is not all bad news as some taxpayers may find themselves with less land tax to pay as the top rate has reduced from 3.7% to 2.4%.

Furthermore, certain groups of land holders (i.e. land held in a trust) will have additional compliance obligations, which require lodging reports with Revenue SA by 31st July 2020.

Key Changes

  • Introduction of a surcharge on land held in trusts. There will be two land tax rates operating concurrently:
    • Trust rates – additional 0.50% surcharge (site value exceeding $25,000)
    • General rates – other taxpayers including some discretionary trusts and excluded trusts – new tax-free threshold of $450,000

^Estimated thresholds reflect expected site value growth as at the 2019/2020 Budget

*Thresholds not subject to change (value fixed by Legislation in relevant year)

    • Current rate structures for 2019/2020

    • Top land tax rate reduced from 3.7% to 2.4%
  • A shift to aggregation based on an owner’s interest in every piece of land, rather than only aggregating properties held in the same ownership structure;
  • Related companies will now be grouped and land treated as if owned by a single corporation;
  • New reporting requirements for trustees including notifying the Commissioner for:
    • All existing holdings
    • All new acquisitions and disposals of land
    • Any change in the category of the trust
    • Change in beneficial interest in fixed and unit trusts
    • Completion of administration estate
  • Ex gratia relief provided to eligible individuals

Treatment of land held in various structures

There is no disputing these land tax changes will impact all land holders. While most taxpayers will not be affected greatly; it will be those who hold multiple land holdings in different structures (jointly held, trusts and companies) that will be affected the most. The Government aims to “look-through” these structures, where in the past, the land holdings were taxed separately where owned in multiple entities.
For land held in Trusts, the rules will differ for discretionary and unit trusts and where decision making is required which will ultimately impact the end result:

      • Unit Trust – Trustee of Unit Trusts will need to engage with their unit holders and decide whether to do nothing and be subject to the higher trust surcharge rates or whether to notify the Commissioner and be subject to the general rates where all unit holders will be taxed in proportion to their respective interest.
      • Discretionary Trusts – similarly, land held in trusts will be subject to the higher trust rates unless they able to nominate a beneficiary as the “owner” for land tax purposes, where they will be assessed at the general rates.

If you are a Trustee holding land in a trust, and able to nominate a beneficiary, the Government has extended the deadline to 30 June 2021. This is a once-off opportunity for land held by the trustee before 16th October 2019. The beneficiary will receive a land tax assessment, but will receive a credit for any tax paid by the trust. There are additional conditions and considerations to this nomination, however this is an important issue for review to assist in managing your land tax obligations.

Ex Gratia Relief

Taxpayers who will be worse off with the new land tax measures may have access to concessions to alleviate the increase. To be eligible, the increase in your land tax bill must be above $2,500 when compared to the old rates for 2019/2020. Although the Government has set up a compensation scheme for $25m, this is a temporary relief which will be available for up to three years. Furthermore, the amount of funds the Government has set aside for this means that eligible taxpayers may miss out once those funds have been exhausted.

Concluding Remarks

The new land tax changes to come into force 1st July 2020 are lengthy and complicated. The Government have introduced new aggregation rules shifting away from aggregating properties held within the same ownership structure to aggregating based on an owner’s interest and will group related companies. There will be two land tax rates, the higher of which most trusts will be subject to unless they nominate a beneficiary. Furthermore, trustees will have additional reporting obligations. Eligible taxpayers who are hit with a higher land tax payable than they are used to previously, may have access to concessions to help alleviate the pain.
The new laws provide an opportunity for landholders to review their structures and to consider the impact these changes will have. We encourage all land owners to fully discuss their circumstances with their accountant to be able to make the most tax-effective choices.

Disclaimer

All information provided in this article is of a general nature only and is not personal financial or investment advice. Also, changes in legislation may occur frequently.
We recommend that our formal advice be obtained before acting on the basis of this information

 

CGT concessions: Does your business qualify?

12 February 2020

Wondering if you’re eligible to claim the CGT concessions can be settled by answering a few basic questions.

In addition to the capital gains tax (CGT) exemptions and rollovers available more widely, there are four additional concessions that allow a small business to disregard or defer some or all of a capital gain from an active asset used in the business:

  • 50% active asset reduction – where you can reduce the capital gain on an active asset by 50% (in addition to the general 50% discount if you’ve owned it for 12 months or more, except for companies).
  • Retirement exemption – capital gains from the sale of active assets are exempt up to a lifetime limit of $500,000. If you’re under 55, the exempt amount must be paid into a complying super fund or a retirement savings account.
  • 15-year exemption – if your business has continuously owned an active asset for 15 years and you’re aged 55 or over and are retiring or permanently incapacitated, you won’t have an assessable capital gain when you sell the asset.
  •  Rollover – if you sell an “active” asset, you can defer all or part of a capital gain for two years, or for longer if you acquire a replacement asset or incur expenditure on making capital improvements to an existing asset.

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CGT when spouses have different main residences

7 January 2020

It can sometimes be the case that spouses can have different main residences at the same time. When this occurs, special CGT rules apply to in effect provide only one CGT main residence exemption over this period. However, important decisions and choices may need to be made to optimise the tax outcome in this case (or avoid an adverse outcome).

While in most cases spouses will have a single main residence in which they live together, there may be times when they are separated, for example due to work commitments, where they have two different main residences over the same period.

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Three wise FBT tips for Christmas

10 December 2019

Employers know that popping a champagne cork or two to celebrate the festive season lets staff know their efforts are appreciated, but the well-prepared business owner will also know that a little tax planning can help ensure that it’s not the business that ends up with the FBT hangover.

Three benefits generally provided for the festive season, rather than gold, frankincense and myrrh, typically include:

  • entertainment (that is, a Christmas party)
  • gifts to employees, (and even their family), and
  • cash bonuses.

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CGT exemption on inherited homes

9 December 2019

Inheriting a home or a legal interest in one could be the largest windfall gain that many Australians ever experience. From a tax law perspective, when someone dies a capital gain or loss does not apply when a property passes:

  •  to the deceased person’s beneficiary
  • to the deceased person’s executor or other legal personal representative (LPR), or
  • from the deceased’s LPR to a beneficiary.

While generally no CGT applies when assets are distributed to beneficiaries, there may be CGT implications when the executor or beneficiary sells the inherited asset to a third party.

Selling an inherited property
There are different factors that influence whether CGT will apply, including whether the asset was a pre-CGT asset or not. Assets acquired before 20 September 1985 (when CGT was introduced) are considered pre-CGT assets.

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Fictions (and facts) about work expense deductions

12 November 2019

There can be varied sources for some of the myths about tax deductions —pub-talk, BBQ-banter, hairdresser-homilies, what-your-taxi-driver-just-heard and many others. We sort out fact from fiction.

This year’s tax time saw media reports about various outlandish tax claims — for example the ATO being faced with claims for dental expenses, gambling losses, Lego sets, sunscreen (and an umbrella) for cigarette breaks, and even the cost of a wedding reception (all rejected, by the way).

How certain myths are started about what can or can’t be claimed on tax is anyone’s guess, but it is these snippets of misinformation about allowable tax deductions that can lead unaware taxpayers to make incorrect claims — and get the taxman’s attention.

Here are some of the most common:

Fiction: Everyone can automatically claim $150 for clothing and laundry, 5,000km under the cents per kilometre method for car expenses, or $300 for work-related expenses, even if they didn’t spend the money.

Fact: There is no such thing as an “automatic” or “standard deduction”. Substantiation exceptions provide relief from the need to keep receipts in certain circumstances. While you don’t need receipts for claims under $300 for work-related expenses, $150 for laundry expenses (note: this is for laundry expenses only and does not include clothing expenses) or if you are claiming 5,000km or less for car expenses under the cents per kilometre method, you still must have spent the money, it must be related to earning your income, and you must be able to explain how you calculated your claim.

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