BAMFORD'S CASE: TIME TO REVIST THE TRUST DEED

The Full Federal Court recently handed down a much anticipated decision in Bamford v Commissioner of Taxation (“Bamford”).  This case deals with the foundation upon which beneficiaries of trusts should be assessed for tax purposes, which has been a strongly contested topic for some time.

Although the decision in Bamford is a favourable one, for clarifying the taxation treatment of trust distributions, it is important to note that the decision may be subject to change as both the Commissioner and the taxpayer have sought special leave to appeal the matter to the High Court of Australia.

Click for full article: Bamford' Case




the knp News Desk

Life is Risky

Imagine what it would be like if your business or household was turned upside-down involuntarily with no forward planning. Such as having a business partner being ill or injured? being unable to work? or having a parent ill and at home or ill and needing constant hospital visiting? or if your child was ill in hospital, while other children have to carry on with daily school and activity routines?

Unless we have been through it we rarely think about these types of events.

Read how can your Financial Advisor help?

A Word from the ATO

Because of the changes to the amounts people may contribute to superannuation, which commenced on 1 July 2009, the ATO is writing to people whose superannuation contributions in prior years would have exceed the permitted contributions level this year.

The ATO letter is intended to just be a reminder of the reduction in the permitted contribution amounts. The level of contributions to super does need to be monitored carefully, as the penalties for exceeding the limits can be significant. The maximum Concessional Contributions (employer or personal deductible contributions) limit is $25,000 if you are aged 49 or below, and $50,000 if aged 50 and above.

We will be happy to discuss the contents of the letter, if you receive one, and provide further guidance to assist you to remain within the Contributions Caps.

ATO Audit Activity for Superannuation Funds

We are noticing an increase in the audit activity of Superannuation Funds from the ATO. This activity includes letters from the ATO, either:

-    asking for specific information in regards to tax return items; or

-    suggesting that contribution limits have been exceeded.

About 24,000 letters have been sent to Fund Trustees or Members as a result of data matching by the ATO, triggered by the apparent excess of contribution limits. Unfortunately, the “rubbish in - rubbish out” theory is at work in many cases, with the data matching providing false results. The cases we have reviewed so far indicate errors in the records of the ATO, rather than fault of the Fund Trustees or Members.

If you receive such a letter from the ATO, please do not assume that you have erred. We recommend that you send the correspondence to us as soon as possible after you receive it, and we will provide the appropriate details to the ATO.

Other Financial & Taxation News

Loans and In-House Asset Rules

In a recent decision, the AAT upheld a non-compliance notice issued to a self-managed superannuation fund (SMSF) for breaching the in-house asset rules.

The SMSF made loans to a company, which was a related party of the fund. The total of the loans exceeded the in-house asset rules limit of 5%.

Personal Services Income

The AAT has affirmed that the Personal Service Income (PSI) rules applied to attribute the income of a company to a taxpayer who was the sole director, shareholder and employee of the company.

Meaning of Contributions

The Tax Office has released a Draft Taxation Ruling in which the Commissioner explains his preliminary views on the meaning of the word ‘contribution’ for superannuation purposes.

Deductibility of Interest on Loan to Settle Trust

The Tax Office has released a Taxation Determination in which the Commissioner sets out his views on the deductibility of interest incurred on a loan used to settle a trust to benefit the borrower and others.

Interest on Loan to Acquire Options

The Tax Office has released an Interpretative Decision stating that interest incurred on a loan used to acquire options under an employee share scheme is not deductible.

Investment Commitment Time

In another Interpretative Decision, the Tax Office states that an option in a contract to delay the construction of a depreciating asset does not alter the investment commitment time for the purposes of the small business and general business tax break.

Small Business Assistance

Assistance for Small Businesses

The Tax Office has recently introduced two measures to assist businesses that have an annual turnover of less than $2 million to manage their tax payment obligations.

These measures are:

twelve-month general interest charge (GIC)-free payment arrangements; and

deferral of activity statement payment due dates.

Also included are: 

GIC-free payment arrangements

Deferral of payment due dates

PAYG Withholding and Foreign Employment Income

An Instrument has been registered ensuring PAYG withholding from payments made to individuals employed in foreign countries closely approximate the Australian income tax payable on the relevant foreign employment income.

Tax Returns Not Required for New SMSFs

The Tax Office has advised that newly registered self-managed superannuation funds (SMSFs) that have not legally been established will not be required to lodge a tax return in their first year of registration.


LINKS

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:: July
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knp Classifieds

knp Solutions believes in helping its clients.
In doing so we provide this space monthly for our clients to promote their business.

Classifieds:

Gross Waddell Forthcoming Auctions & Tenders:

Lot 1 Boundary Road Moama - Tender 7 October @ 4pm

939-941 Centre Road Bentleigh East - Auction 15 October @ 12pm

78 Glen Eira Road Ripponlea - Auction 15 October @ 2pm

1015 High Street Armadale - Auction 16 October @ 1pm

105 Main Street Croydon - Auction 21 October @ 12pm

Diamond Creek Shopping Station - Tender 28 October @ 4pm

New manufactured products from Popina (Vic) Pty Ltd under its Goodness Superfoods range:

Digestive 1st Breakfast Cereal range using BARLEYmax, a super grain developed by the CSIRO, is now available in three varieties: Digestive, Protein and Heart
Please visit the Goodness Superfoods website to find out more.

If you wish to submitt your classified in the October edition please email sdunn@knp.com.au