Showing posts from 2019

Reversionary pension nominations and BDBNs

A member who has made a Binding Death Benefit Nomination (BDBN) who subsequently commences a pension with a reversionary nomination has effectively varied their BDBN, and the BDBN may be undermined.
Under the ATO’s view, set out in TR 2013/5, a member’s pension ceases for tax law purposes on their death unless an eligible dependant is automatically entitled to receive the pension as a reversionary beneficiary.

A nomination will broadly fail to satisfy the ATO’s strict standard of reversion if any element of discretion arises under the governing rules of the fund in relation to the death benefit.

This means, among other things, that the 12-month deferral in the timing of the credit to the recipient’s transfer balance account will not be available.

Naturally, a binding direction in relation to a member’s death benefits can be recorded in various ways.

For instance, nominations in relation to death benefit pensions are commonly recorded in pension commencement documents, reversionary p…

Protecting your clients’ rights to Legal Professional Privilege

Written by Sue Williamson

Sue Williamson is a legal partner with EY, specialising in tax controversy. She chairs the Tax Institute’s Dispute Resolution Committee.

Legal Professional Privilege (LPP) is a cornerstone legal right that is fundamental to the effective operation of the Australian legal system and the administration of justice (refer to Baker v Campbell (1983) 153 CLR 63, 60 (Gibbs CJ)). It is a right that is owned by the client, not the lawyer. As with all client rights, our role as the lawyer is to protect the right unless instructed otherwise. No adverse inference should be taken because a person refuses to hand over a document that is subject to LPP. No person should refuse to hand over a document claiming that it is subject to LPP unless they have positively determined that the document is subject to LPP.

The ATO has expressed concern that ‘reckless and false’ claims of LPP have been made by some tax professionals to avoid disclosure of documents during tax audits (refer t…

Eddy Moussa defines “critical” skills for success in tax

Eddy Moussa, CTA, on which skills are key for success and how membership has impacted on his career.

We caught up with Eddy at the 34th National Convention in Hobart. He is a Partner at PwC and is currently a member of our National Council.

“What I really like about tax and being a tax adviser is it involves problem solving, and it's a way of problem solving which is applying the law to business transactions,” he says.

“And in the place that I work, you need to do that in a team environment.

“So I get to work with great people solving interesting problems for clients.”

Tax as a body of law is massive

Eddy says that building technical knowledge and structured education is imperative for new practitioners.

“Ultimately, we're assisting clients manage their tax affairs and ensuring they're complying with the rules.

“And it's very hard to do that if you don't understand the rules yourself.

“Tax as a body of law is massive. Then, you can overlay ATO guidelines, tre…

Announced but un-enacted measures – everything old is new again

Written by Mark Molesworth

Mark Molesworth is a Partner in BDO’s Tax Division and Chair of the Tax Institute’s SME & Tax Practitioner Technical Committee. He also represents The Tax Institute at the ATO’s Private Groups Stewardship Group.

Announced but un-enacted measures – everything old is new again 

In last week’s TaxVine Tax Counsel Report, Tax Counsel Stephanie Caredes discussed the tax policies that the Coalition Government took to the recent election. This week I thought I would take a quick look at the measures that have been announced, but not enacted at the time that Parliament rose for the election.

Depending upon whether you lump together related measures or split them out, there are up to 107 announced measures that have not yet made it into law. Some were the subject of legislation that lapsed when the election was called, others haven’t been opened for consultation yet. The earliest proposed application date is 1 July 2001 (for a debt-equity integrity measure first anno…

Small Business CGT Concessions – The Good, The Bad and The Ugly

Much like the 1966 Clint Eastwood film, small business CGT concessions can often be Good, Bad or just damn right Ugly.

For clients selling their businesses, the small business CGT concessions can reduce their tax significantly or, in some cases, eliminate it altogether. Recently enacted integrity measures and increased ATO review activity make these concessions an area where extreme caution should be exercised.

Have you wrapped your head around the latest legislation?

Hoping to shed some light on the complex changes to the small business CGT concessions, which came into legislation in September 2018, we interviewed experts Neil Brydges, CTA, Sladen Legal, Adrian Zuccarini, Australian Taxation Office and Matthew Meng, Victorian Bar.

Navigating the Wild West of Small Business CGTs can be a difficult task - “this is a highly technical area” says Matthew, “practitioners really need to track through the detailed requirements in every case”.

Matthew, a practising Barrister, specialisin…

Tax Partner: invest early in your career

Geoff Stein, CTA, Partner at Brown Wright Stein Lawyers, shares why he values professional development events – including the recent Women in Tax Special Budget Edition Lunch in Sydney – why practitioners need to get on top of change and advice he’s followed from the early stages of his career. Geoff has worked as a lawyer in Sydney for over 20 years, specialising in commercial and tax law. He advises clients on tax, commercial, trust, estate planning, wealth management and ancillary legal issues. “Today was a great lunch for Women in Tax,” he says. “We really got down to some hard tax issues, and it was great to see that from not just a female perspective, but to talk about the general issues and to have female voices promoted.” Investing in your own community “The Tax Institute CPD events are fantastic, and I encourage all of our staff to attend as many as we can,” he says. “They are pitched at various different levels, and it means that there's usually something for everybody. “I'…

Five SMSF estate matters you must talk to your client about

This post is an excerpt from the paper 'Five SMSF estate matters you must talk to your client about', this month's free technical paper for members.

ATO data confirms there are over 597,000 of SMSFs in Australia. We see many instances where SMSFs hold the greatest pool of assets for clients. 
Unfortunately we are also seeing many instances where the SMSF has been the forgotten part of the succession planning puzzle, or where there has been little thought on key issues such as succession of control or passing of death benefits.

It has been very easy for clients to complete a standard death benefit nomination (DBN) form to deal with the assets of the SMSF. While that often works for situations where there are happy families and simple scenarios, increasingly the SMSF is becoming the new battleground.

Shifting the mindset of clients from only considering a DBN, to thinking more broadly about their SMSF and their succession planning goals can be a tricky discussion. This needs …

“Practical” safe harbours and Australia’s transfer pricing rules

The enactment in 2013 of Subdiv 815-B of the Income Tax Assessment Act 1997 (Cth) (ITAA97) was the first substantive change to Australia’s domestic rules since 1982.

There were many changes of significance, including that, unlike the law it replaced (Div 13 of the Income Tax Assessment Act 1936 (Cth) (ITAA36)), Subdiv 815-B is self-executing.

In his article in Taxation in Australia, “Practical” safe harbours and Australia’s transfer pricing rules, excerpted in this post, Michael Jenkins, CTA, looks at some of the issues facing businesses and their advisers.

Internationally, there is growing acceptance of the usefulness of safe harbours in transfer pricing for smaller and less complex international related party dealings (IRPDs). For these categories of IRPDs, safe harbours can be effective as a mechanism for improving certainty and reducing costs of compliance.

As Subdiv 815-B is self-executing, the ATO is not able to specify binding safe harbours (they would require an Act of parlia…

Stunning and unexpected Coalition victory – the tax changes

By Professor Robert Deutsch

Q: Will the Coalition likely be able to get its proposed package of personal tax cuts approved by Parliament?
A: The answer to this question will very much depend on the composition of the Parliament – in particular, the new Senate and the ability of the Government to negotiate with the unaligned parties and independents.
There are actually three stages of personal tax changes that are proposed by the newly elected Government.
Stage 1
Stage 1 commences on 1 July 2019 and will include a minor adjustment to the marginal tax rates and the introduction of a new $ 1,080 low and middle income tax offset to apply with effect from 1 July 2018.
Ideally, Stage 1 would be passed by Parliament before 1 July 2019; if after that date, more complex administrative arrangements may be required. The way the quirky Australian electoral system works is that the Senate as it stood before the 18 May election will continue until 30 June 2019. This means that the Government will be w…

Why Continuing Professional Development never leaves you empty-handed

Tax Partner Paul Banister, CTA on why he loves The Tax Institute’s events.
Paul Banister, CTA is a Partner at Grant Thornton and has been a member of a number of Institute committees. We caught up with him at the 34th National Convention in Hobart.
Events like the National Convention, they're always fun,” he says.
“What’s great about these events is hearing regular speakers on what their latest insights are, but it's also really good to hear from new speakers and what they're saying about problems that I might be facing on a day-to-day basis.
“And ultimately, putting all that together, you've always got something great to come home with, whether it's just having had a good time that you can reflect on or you've got a few deliverables that you could take to your clients.”
Sailing the changing seas in tax
Events like the National Convention are becoming more and more important in the face of change in tax.
“Coping with change is something that all businesses, all p…

Are increased disclosure requirements resulting in taxpayers paying their fair share of tax?

Australia is leading the charge in matters of tax transparency, and while measures and focus in this space have already increased dramatically in recent years, this trend is set to continue.

Big business in Australia already makes disclosures at the public level, which includes the Board of Taxation’s voluntary tax transparency code, and the ATO’s annual report of entity tax information.

Disclosures to the ATO include the International Dealings Schedule, which details any international related party dealings, and through transfer pricing documentation for related party transactions, via the ATO's Key Taxpayer Engagement and Top 1,000 program, and many other measures. Australia has also adopted the OECD Country by Country reporting recommendations.

This minefield of obligations and dealings with a number of bodies, means that advisers need to understand exactly what information is required to be disclosed, to who, when, and how.

While penalties can apply, and the ATO can use its …

Administering deceased estates

Over a lifetime a person can acquire a number of different roles, including Director, Shareholder, Trustee, Guardian and/or Appointor or Testator.

The death or mental incapacity of a client impacts each of these roles held.

Following death or the loss of mental capacity it can be a very difficult and expensive exercise to resolve the position to allow for a client’s affairs to be attended to in a cost effective and time efficient manner.

In addition, with the rise of elder abuse and the evolving area of Elder Law, it is important for professional advisors to consider their professional obligations, including the role we can play in future proofing ageing clients from potential difficulties and/or family conflict.

In her paper, 'Administering deceased estates: A practical perspective', presented at the 2019 Estate and Succession Planning Intensive in Perth, Loreena Gillon, CTA looks at the issues facing advisers in such situations.

The paper is excerpted in this post.


Present entitlement and the dissenting beneficiary

Appointment of trust income to an object is invariably a unilateral act of the trustee.

However, a trustee cannot mandate that a presently entitled beneficiary accept an allocation of income. A beneficiary, for many reasons, may not wish to possess a trust interest, but the ability of a beneficiary to effectively disclaim an appointment of trust income is not often a straightforward proposition.

This is particularly the case where an unwitting beneficiary is deemed to have “tacitly” accepted and/or constructively derived the interest. Indeed, the potential tax outcomes facing the beneficiary are usually invisible until professional advice is sought, and this is frequently the case after a notice of amended or default assessment has been issued by the Commissioner.

In his article in June's issue of Taxation in Australia, excerpted in this post, Frederick Mahar discusses the trust law concept of present entitlement, when present entitlement is taken to have been conferred, and how …

What happened in Tax in May?

Written by TaxCounsel Pty Ltd

The following points highlight important federal tax developments that occurred during May 2019.

Each month, these developments are considered in more detail in the 'Taxing Issues' column of Taxation in Australia, the Institute's member journal.

Environmental protection activities

The Commissioner has issued a draft ruling that considers aspects of the immediate deduction allowable under s 40-755 ITAA97 for expenditure incurred for the sole or dominant purpose of carrying on environmental protection activities (TR 2019/D3).

Cryptocurrency: data matching

The ATO has announced that it is collecting bulk records from Australian cryptocurrency designated service providers as part of a data matching program to ensure that people trading in cryptocurrency are paying the right amount of tax.

Company carrying on business: rating purposes

A final ruling recently issued by the Commissioner considers when a company can be said to carry on a business for ra…