There’s nothing as certain as death and taxes, but tax on death is not so clear. Generally, the law says there is no CGT liability for the deceased on the transmission of an asset, specifically a dwelling, to a beneficiary. The beneficiary is considered to be the new owner of the inherited asset on the day the deceased person died and CGT does not apply to that asset. This applies to all assets, including a dwelling. The exception is where the beneficiary is a "tax advantaged entity" (TAE), such as a charity, foreign resident or complying superannuation entity. If [...]

As you sip a drop from the latest vintage you’ve crushed with the toes of your family and friends, is it possible that turning these vines into wine has ventured into primary production, and this happy hobby has become a business? How can you tell? Defining “primary production” and “business” is no problem. Figuring out if a business of primary production is being carried on in your particular case is not so easy. First, let’s look at the definitions. “Business” is clearly defined to include any profession, trade, employment, vocation or calling (other than an occupation as an employee), [...]

To keep your SMSF’s auditor and the ATO happy, it’s essential to take asset valuation seriously. By law, SMSFs must record all of their assets at “market value” – an important requirement that allows funds to accurately report the value of members’ benefits. Additionally, there are a number of SMSF investment rules that specifically require a “market value” to be assessed. For example, SMSFs are generally prohibited from acquiring assets from related parties – with some notable exceptions such as “business real property” (broadly, 100% commercial property) and listed shares. However, these exceptions only apply if the assets in [...]

You may have heard about the “instant asset write-off”, but do you understand exactly how it can benefit your business? Read our case study for insight into how the write-off works, and what you need to do by 30 June 2020 to take advantage of this limited-time incentive. The write-off allows small and medium businesses (with turnover up to $50 million) to claim a full deduction for any depreciating asset costing up to $30,000 in the year they first use it, rather than having to deduct the cost over several years under the usual depreciation rules. It’s a temporary [...]

Thinking about a gearing strategy for your SMSF? When planning a borrowing in your SMSF to buy an asset such as property or shares (known as a “limited recourse borrowing arrangement” or LRBA), you can choose to borrow from a commercial lender or a private party. This could even be a related party of the SMSF, such as the SMSF members or the members’ family trust. Bypassing the banks might seem like a great way to draw on wealth you hold outside the SMSF to build your retirement savings. But be aware that if related-party LRBAs don’t reflect “arm’s [...]

It’s often obvious when a company is carrying on a business. But many clients have companies set up in their family or business groups, whose “business” status may be less clear. Common examples include companies that simply hold assets used by another entity in the group, that receive trust distributions, or that appear to be “inactive” because they no longer trade. So, why does it matter? Whether an entity is considered to carry on a business can affect its tax position in various ways. If you run a business, you may be able to access the instant asset write-off [...]

Thinking about setting up an SMSF? For many people, SMSFs are a great option for building retirement savings, but they may not be suitable for everyone. In this first of a two-part series, we explain some of the key differences between SMSFs and public offer funds. While public offer funds are managed by professional licensed trustees, the management responsibility for SMSFs lies with the members. Every SMSF member must be a trustee of the fund (or, if the trustee is a company, a director of that company). This is an advantage for those who want full control over their [...]

Have you run a small business that has ceased or paused operations? Or perhaps you’ve been hired as an ABN contractor? The ATO is cleaning up the Australian Business Register and is on the lookout for people who may not be entitled to hold an ABN. This year, the ATO has been focused on improving the integrity of the Australian Business Register (ABR). You may have even heard that the ATO has been “bulk cancelling” a large number of ABNs. Only entities that “carry on an enterprise” are entitled to hold an ABN. An enterprise includes running a business, [...]

Planning on going “back to school”? The costs can really add up, but the good news is that your course fees may be deductible if the course is sufficiently related to your current employment. In this first installment of a two-part series, we explain when you can deduct your tuition fees for work-related education. Our second installment will look at other expenses like textbooks, computers and travel. The first step is to work out whether the course you’re studying entitles you to claim self-education deductions. The course must lead to a formal qualification from a school, college, university or [...]

Have you sorted out Single Touch Payroll (STP) arrangements for your small business? If not, it’s time to get cracking! From 1 July 2019, STP reporting will become mandatory for all employers, including small businesses (ie those with fewer than 20 employees) that have previously been exempt. The ATO has set a three-month transition period between 1 July and 30 September for you to get your STP reporting fully operational. STP is an electronic reporting system that requires employers to submit payroll information such as salaries, wages, allowances, PAYG withholding and superannuation contributions to the ATO directly through their [...]