Newsletter - July 2020 Edition 2

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Cents & Sensibility | Tax News | Views | Clues 

 

31 July

Making sense of it all by Ali Roshan - The SMSF Investment Strategy

 

The start of the Financial Year is an opportune time to review your investment strategy.  As a trustee of a self-managed super fund (SMSF), you should review at least annually the investment strategy and document any decisions arising from the review.

 

Your investment strategy is your plan for making, holding, and realising assets consistent with your investment objectives and retirement goals.

 

It should set out why and how you have chosen to invest your superannuation to meet these goals.  Superannuation legislation requires you to prepare and implement an investment strategy for your SMSF. You must also review this strategy regularly to ensure that the strategy & investments remain consistent.

 

Certain significant events, such as a market correction and macro-economic shocks, or a Pandemic should also prompt a review and may require the investment strategy to be updated. The ATO has confirmed that if the assets of an SMSF, or the level of investment in those assets, fall outside of the scope of the strategy, the trustees should take action to address that situation. This could involve rebalancing the assets allocation or updating the strategy itself.   

 

The ATO does take investment strategy breaches seriously, A penalty of $4,200 can be applied on each individual trustee or the corporate trustee for a breach of the investment strategy requirements.  As the penalties are significant, it pays get professional advice.

 

Ali Roshan is an Authorised Representative (ASIC No. 000378611) of Lifespan Financial Planning

ABN 23 005 921 735 AFSL Number 229892

No Advice Warning / General Advice

 

The purpose of this article is to provide general information only and the contents of this website do not purport to provide personal financial advice. KNP Solutions strongly recommends that investors consult a financial adviser prior to making any investment decision.

The contents of this KNP Solutions article does not take into account the investment objectives, financial situation or particular needs of any person and should not be used as the basis for making any financial or other decisions.

 

The information is selective and may not be complete or accurate for your purposes and should not be construed as a recommendation to invest in any particular product, investment or security. The information provided on this website is given in good faith and is believed to be accurate at the time of compilation.

Treasury Laws Amendment (2020 Measures No 3) Bill 2020

 

Treasury Laws Amendment (2020 Measures No 3) Bill 2020 has passed both Houses of Parliament and is now law.

 

Extending the Instant Asset Write-Off

This legislation amends the income tax law to allow a business with an aggregated turnover for the income year of less than $500 million to immediately deduct the cost of a depreciating asset (instant asset write-off).  The asset must cost less than a threshold of $150,000 and be first used or installed ready for use for a taxable purpose by 31 December 2020.  Without these amendments the $150,000 instant asset write-off would have ended on 30 June 2020.

 

By extending the previous end date of 30 June 2020 to 31 December 2020, the amendments give businesses additional time to access the $150,000 instant asset write-off for their acquisitions of depreciating assets, including those purchases that have been delayed by supply chain disruptions.  Further, the amendments extend cash flow support to businesses through the early stages of the recovery from the economic conditions caused by COVID-19.

 

It will be interesting to see if this timeframe is further extended at some later point.  Note that, come 1 January 2021, if there is no further extension, the $150,000 threshold for the instant asset write-off for depreciating assets will collapse to $1,000 and the turnover threshold for eligibility for the outright deduction of less than $500 million will fall to a turnover of less than $10 million.

 

Note:  Please contact our office if you are considering purchasing a depreciating asset for your business and want to know if you will be eligible for the instant asset write-off.

Treasury Laws Amendment (2019 Measures No 3) Bill 2019

 

Treasury Laws Amendment (2019 Measures No 3) Bill 2019 has passed both Houses of Parliament and is now law.

 

Testamentary trusts and minors

This legislation contains amendments to ensure the tax concessions available to minors in relation to income from a testamentary trust only apply in respect of income generated from assets of the deceased estate that are transferred to the testamentary trust (or the proceeds of the disposal or investment of those assets).

 

Broadly speaking, when a trustee distributes income to a minor it is taxed at the highest marginal rate (plus Medicare levy).  However, there are certain exceptions to this rule.  One such exception is where the trust is a testamentary trust – being a trust that was established as a result of the will of a deceased individual.  Income from a testamentary trust is a type of ‘excepted trust income’ that is generally taxed at ordinary rates.

 

Prior to this legislation being passed, the previously existing law did not specify that the assessable income of the testamentary trust be derived from assets of the deceased estate (or assets representing assets of the deceased estate).  As a result, assets unrelated to a deceased estate that were injected into a testamentary trust may, subject to anti-avoidance rules, generate excepted trust income that was not subject to the higher tax rates on minors.  This was an unintended consequence, which allowed some taxpayers to inappropriately obtain the benefit of concessional tax treatment.

 

This legislation clarifies that excepted trust income of the testamentary trust must be derived from assets transferred to the testamentary trust from the deceased estate or from the accumulation of such income.

 

This change will apply in relation to assets acquired by or transferred to the trustee of a testamentary trust on or after 1 July 2019.

Regulations confirm no SG obligation on JobKeeper payments where work is not performed

 

The federal government has registered the Superannuation Guarantee (Administration) Amendment (Jobkeeper) Payment Regulations 2020.

 

These regulations ensure that amounts of salary or wages that do not relate to the performance of work and are only paid to an employee to satisfy the wage condition for getting the JobKeeper payment are prescribed by the Regulations as excluded salary or wages.

 

The effect is that these amounts are excluded from the calculations of an employer’s superannuation guarantee shortfall and the minimum compulsory superannuation contribution an employer is required to make in respect of an employee to avoid a superannuation guarantee charge liability.

 

Likewise, the Regulations recognise that an employer is only entitled to a JobKeeper payment for its employees if the business has suffered a substantial decline in turnover.  In these circumstances, it is appropriate to require employers to only make minimum superannuation contributions in respect of amounts that are required to be paid to an employee for the performance of work. 

 

Employers would not be required to make contributions in relation to additional amounts paid to satisfy the wage condition (for example, the amount by which $1,500 exceeds an employee’s normal pay). 

 

Note:  If you are concerned about the calculation of compulsory superannuation for any employees supported by JobKeeper, please contact our office.

Call our hotline for instant assistance with the new government COVID-19 initiatives. This includes JobKeeper, PAYG Cash Flow Support, Instant Asset Write-Off, Accelerated Depreciation Deductions, SME cashflow lending, Payroll tax refund, rent relief, Land Tax deferral & ATO administrative relief measures.​

Call our hotline for instant assistance with the new government COVID-19 initiatives. This includes JobKeeper, PAYG Cash Flow Support, Instant Asset Write-Off, Accelerated Depreciation Deductions, SME cashflow lending, Payroll tax refund, rent relief, Land Tax deferral & ATO administrative relief measures.​