January Tax Update

1. Government Financial System Inquiry

Major items on what maybe on the governments tax radar as a result of the above.

Capital Gains Tax

Reducing concessions for Capital Gains Tax based on time holdings.

Dividend Imputation

Benefits of cost of capital have declined. Imputation credits refunds to individuals and superfunds have large government revenue consequences.

Superannuation

For individuals with large balances

Reduce:

(a) non-concessional contributions
(b) tax super at marginal rates
(c) align earnings tax rate between accumulation and retirement phases of fund

2. Commuting a TRIS

Commuting a transition retirement income stream

SMSFD 2014/1

If a TRIS is partially commuted and the resulting lump sum is cashed out of the super system the lump sum counts towards the required TRIS (minimum payments).
To the extent that the TRIS is comprised of unrestricted non-preserved benefits this is able to occur.

- it doesn’t count towards the 10% rule
- a lump sum payment that results in a partial commutation of a pension can be ‘in specie’
- watch CGT events i.e. rollover of assets upon transfer of funds – endeavor to use actuarial methods rather than segregation to minimize impact of cessation of pension, prior to rollover.

3. Excess Contributions Tax

From 1 July 2013 pursuant to draft legislation:

Excess Concessional Contributions

Can now be included in a member’s assessable income and taxed at marginal rates.
A 15% tax off set is then provided to cater for the 15% contributions tax.
A member is now able to withdraw 85% of the their excess concessional contributions, these amounts no longer count towards the members Non Concessional contributions caps.

Non – concessional Contributions

The draft legislation proposes to provide members with the option to withdraw their excess non-concessional contributions. Such withdrawn amounts will not be subject to excess tax.

In withdrawing the excess, the member will also be required to withdraw any associated earrings an amount calculated by the ATO.
This amount will be included in the member’s assessable income at marginal rates.
- Must be an approved form within 60 days
- Amounts released must be first applied to tax free components
- calculations of associated earnings returned at 9.66%

4. Important Changes

Stamp Duty 

Changes on stamp duty/options 

Where an option is granted or created after 23 October 2014 and the benefit of that option is vested in a third party (whether by novation, nomination or otherwise)
- duty will be payable on that nomination or novation – even in circumstances where the option is not ultimately exercised.
- duty will also be payable upon the transfer of the land to the new option holder upon exercise of the option with consideration for the transfer including both the nomination fee and purchase price.
However a credit will be allowed for any duty paid on the early novation.
Where a third party obtains the benefit of an option to purchase land in NSW for valuable consideration, but subsequently fails to exercise the option
- duty will be payable on the nomination or novation of option
- no refund is available if the option is not exercised

Self-Managed Superfund Transfers

A new Bill also rewrites section 62A of the Duties Act to clarify that members who hold jointly owned property can transfer that property into the superfund.
The concession will be granted provided that property is segregated to them in the superannuation fund accounts in the same proportions as they owned beforehand.
You would need to segregate these assets between members and have a deed that allows you to do this. 

Disclaimer - The material contained in this newsletter does not constitute advice. DPL is not responsible for any action taken in reliance on any information contained in this newsletter. Anyone reading the newsletter should not act upon material contained in this newsletter without appropriate consultation.