By Tony Butler, Partner
Changes to Taxation of SMSF Leveraged Assets
Another budget looms, and more changes to the taxation of superannuation are very much on the radar. One of the less noticed is a proposed change to Limited Recourse Borrowing Arrangement loans.
This structure requires a “Bare Trustee” to purchase assets with borrowed money and transfer to the Super Fund upon repayment of the loan. However, the ATO had expressed some doubt as to whether this is a “Bare Trust” as is required for the exemptions and referred to in recent ATO Interpretive Decisions as the “Related Trust”.
The draft legislation in a new Bill tabled 19 January 2015 treats the Super Fund as the owner from the start meaning this doubt would be removed as to the stamp duty, CGT and other tax implications.
The Building and Construction Industry Payments Amendment Act 2014 (Qld) (“BCIPA”) is now in operation. The following important changes have been made:
- adjudicators will now be appointed by the Queensland Building and Construction Commission Adjudication Registry;
- claims will now be classified as standard payment claims (up to $750,000) or complex payment claims (over $750,000);
- some key time frames have been changed, including:
- now 15 business days to serve a payment schedule; and
- now 15 business days to submit an adjudication response;
- applications under section 19 have effectively been abolished – there is now a ‘second bite’ chance for respondents to serve a payment schedule;
- payment claims may be made for the return of retention and security; and
- the time for serving a payment claim following completion of the construction work has been reduced from 12 months to 6 months.
Executor’s Commission – What’s the Deal?
Administering an estate can be a time consuming and onerous obligation. While costs incurred are recoverable, this does not extend to charging for your time and consideration of the issues that can be fraught with family baggage.
The Court can make orders for payment of an executor or alternatively obtain the consent of every beneficiary prior to charging. Better still, executors should seek a charging clause in the Will when they are asked to take on the role, or obtain the consent of the beneficiaries at the outset of the estate.
Executors do need to be mindful however of a recent ATO Interpretive Decision that determined that executors commission should be declared as assessable income under the Income Tax Assessment Act 1936 (Cth).
Statutory Demands for Debts – Genuine Dispute
Slow paying debtors know only too well that the only ‘debts’ at law are those that the parties agree are owing and those that are the subject of a Court order. Anything else is a mere dispute. But is it a genuine dispute or is it a rouse?
The Federal Court has recently considered the matter and its reasoning is instructive for creditors and debtors alike.
The protagonist’s brothers entered into oral agreements that varied written loan agreements that were said to be in dispute. The Court held that the informal nature of discussions between the brothers was not unusual and did not prevent a genuine dispute arising in the circumstances. The Statutory Demand was set aside with costs.
So the grounds for establishing that there is genuine dispute on amounts owed are not onerous for debtors and creditors should be wary of moving too quickly to the service of a Statutory Demand. Debtors should put creditors on notice early of any genuine dispute.
Looking out for impending vesting dates
For asset protection and better tax management, you may wish to extend the period property is held in a trust beyond what is known as the “vesting date”. This is the date property must be transferred to the beneficiaries and enables the government to collect the stamp duty and capital gains tax that will have been postponed during the life of the trust.
The Property Law Act 1974 (Qld) sets the vesting date at 80 years but many deeds specify a shorter period.
Be aware the Court can order the extension of the vesting date even where the sole purpose is to prevent significant tax implications impacting on the transfer of land. This is reason enough to have older trust deeds reviewed for looming vesting dates In particular those trust deeds created in the 1970s where the drafting practice seems to have opted for shorter vesting periods that are now coming back to confound trustees.
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