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Business Brief From Chotais, Chartered Accountants NEWSLETTER No. 99-7 July, 1999
How Will Tax Reform and SuperannuationChanges Affect You?Superannuation and Share Scheme Crackdown Superannuation Fund Investment Rules Trust Distributions Into Superannuation ATO Regulation of Small Super Funds
Following a deal between the Government and the Democrats, a GST, which will exclude certain food and selected household items, seems certain. Compliance costs will certainly increase for business, as taxpayers will need to identify which food is GST-free. Additional funding will be provided to the Tax Office due to the extra administration required. Other changes to the Tax Reform proposals include:
The Government has also noted the Democrats proposals for: These proposals will be referred to the Ralph Committee for consideration. Superannuation and Share Scheme Crackdown The Tax Office has issued a ruling concerning contributions to employee benefit trusts and non-complying superannuation funds on behalf of employees. The critical issue is whether FBT applies. The ruling suggests that in some circumstances contributions are subject to FBT because the trustee of the fund will be an associate of the employee. According to the ATO, this may apply even where the employee is not a member of the fund when the contribution is made. Taxpayers who have entered into such arrangements should consider their position carefully. Superannuation Fund Investment Rules The Government has released draft legislation concerning changes to superannuation fund investment rules announced in its 1998 Federal Budget. · Extend the in-house assets rules to prevent superannuation funds leasing assets to related parties; · Prevent superannuation funds from acquiring investments in related parties, for example, units in a trust that borrows to acquire assets; · Allow superannuation funds with fewer than five members to acquire and lease (at market value) real property used exclusively by a related party in its business; and · Define a related party to be a member of the fund, an employer sponsor or an associate of either. Associates include companies and trusts controlled by the member and/or employer sponsor. Transitional rules allow superannuation funds to retain certain existing investment and leasing arrangements. Other investments and leases must be unwound by 30 June 2001. Trust Distributions Into Superannuation Special income derived by superannuation funds is taxed at 47% rather than the normal rate of 15% for a complying superannuation fund. Proposed amendments to strengthen the special income provisions, by including trust distributions to superannuation funds, have recently been introduced into Parliament. The following distributions of income to a superannuation fund will be included in special income and taxed at 47%: It is proposed that the amendments will apply to distributions made after 2.OOpm on 25 November 1997. Motor vehicle per kilometre rates: 0—2,500cc 33 cents Superannuation and Termination Amounts 1999/2000 Tax free amount — bona fide redundancy. The post June 1983 ETP component threshold for concessional tax treatment will be $96,637. The SGC quarterly maximum contribution base will be $25,240. The 15% superannuation and termination surcharge will apply to those having adjusted taxable income exceeding $94,966. Between $78,208 and $94,966 shading in will apply at the rate of 1% for each additional $1,118. ATO Regulation of Small Super Funds
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