LRBAs and related trusts
Draft legislative instrument
Section 71(8) of the Superannuation Industry (Supervision) (SIS) Act excludes an investment by an SMSF in the custodial trust arrangement required for a limited recourse borrowing arrangement from the definition of an in-house asset, despite being a related trust.
However, it has become evident the legislation did not adequately protect these arrangements at two points in time:
- before either the borrowing has begun or the asset is held by the trust, and
- when the loan has been repaid, but the trust still holds the assets.
The legislative instrument aims to provide an in-house asset exclusion during these periods to provide greater certainty for SMSF trustees.
Dividend washing
ATO Tax Determination TD 2014/D1
This determination has been issued to address the Australian Taxation Office’s (ATO) concern with a dividend washing scheme. This scheme has been used by SMSF trustees to double-dip on dividends for a parcel of shares.
In the determination, the application of part IVA of the Income Tax Assessment Act was considered.
Under the scheme, shares are sold on the day they go ex-dividend and the proceeds are used to purchase a matching parcel of shares on a cum-dividend basis. The purchased shares trade at a premium due to the eligibility to receive franked dividends. This allows the trustee to receive dividends on both parcels of shares while only ever having exposure to one parcel of shares.
The ATO view is that the timing of the transaction is specifically to obtain a tax benefit. The determination indicates the imputation benefit on the purchased shares may be disallowed.
Death benefits from exempt public sector super scheme
ATO Interpretative Decision ID 2014/2
This interpretative decision considered the tax status of an income stream that was paid due to a family law payment split that was commuted upon death and paid to a deceased estate. The ATO view is that the payment made is treated as a superannuation lump sum death benefit.
Deeming of account-based pensions
Social Services and Other Legislation Amendment Bill 2013
Legislation to apply deeming to account-based pensions (ABP) has been passed.
Deeming will apply to new ABPs commenced after 31 December 2014 or those held by people who either were not in receipt of a means-tested Centrelink/veterans’ affairs benefit as at 31 December 2014 or who lost entitlement to these payments after that date.
Deeming will impact on the income test for determining means-tested payments as well as the care fees for home care and residential aged care.
Definition of financial dependant
ATO Interpretative Decision ID 2014/6
This interpretative decision provides some indication on who is a financial dependant for superannuation tax purposes. However, most commentators express caution in relying on this result too much.
The ATO found a child over the age of 18 who was in receipt of Youth Allowance and living at home with their parent was a financial dependant. This allowed the child to receive death benefits tax free.
It is clear from this decision the ATO wants to see substantial financial support or maintenance to accept that financial dependency exists.
Small business clearing house
Responsibility for the small business clearing house used by employers with less than 20 employees to make super contributions shifted from Medicare to the ATO on 1 April.
SuperStream requirements
SMSF trustees who receive superannuation guarantee payments from employers with 20 or more employees should be getting ready to meet SuperStream requirements.
From 1 July, these employers will need to send contributions electronically. This means the SMSF will need to have an electronic service address from a service provider to receive these contributions.
Members will also need to provide the Australian business number and bank account details of the fund to their employer by 31 May.
