Tax and Super February 2023 Newsletter
The ATO has released its final guidance material on trust distributions which may particularly impact those who operate a family trust. To recap, in February 2022 the ATO updated its guidance around trust distributions made to adult children, corporate beneficiaries and entities that are carrying losses. Depending on the structure of these arrangements, potentially the ATO may take an unfavourable view on what were previously understood to be legitimate distribution arrangements. The ATO is chiefly targeting arrangements under section 100A of the Tax Act, specifically where trust distributions are made to a low tax-rate beneficiary but the real benefit of the distribution is transferred or paid to another beneficiary usually with a higher tax rate.
From 1 January 2023, if you’re aged 55 years or older you may be eligible to make a downsizer contribution of up to $300,000 (or $600,000 for a couple) to your superannuation fund from the proceeds of the sale of your home where specific requirements are met. Downsizer contributions can be a great way of boosting your superannuation leading up to or after retirement. As well as the extra capital they introduce into super, the contributions can also earn investment income that is either tax-free if you commence an income stream with the funds or be taxed at a concessional tax rate while your account is in accumulation phase.
Meanwhile, as we enter into the New Year, with many economists predicting a slowing of the economy, planning your business’s cashflow is more important than ever. Studies suggest that the failure to plan cashflow is one of the leading causes of small business failure. To this end, a Cash Flow Forecast is a crucial cash management tool for operating your business effectively. In basic terms, it tracks the sources and amounts of cash coming into and out of your business over a given period.
Missing the director ID deadline: For those who have missed the deadline to obtain a director ID, you can still apply! However, an extension of time application form will need to be completed first. Although the deadline may have been missed, the ATO says it will take a reasonable approach with directors who are trying to do the right thing.
ATO’s new year resolutions: Whether your side-hustle has crossed the line into a business, keeping good business records, and determining whether the personal services income rules apply to you…are just some of the issues that the ATO says will be on its radar as we head into 2023.
Using your SMSF property upon retirement: Many SMSF trustees wonder if they can live in their SMSF property once they retire. This is a common question particularly as property is such a popular SMSF investment. The answer is that the rules in this area are quite restrictive.
The importance of cashflow forecasts: Cashflow is one of the leading causes of small business failure. To this end, a Cash Flow Forecast is a crucial cash management tool for operating your business effectively – tracking the sources and amounts of cash coming into and out of your business.
ATO finalises section 100A guidance for family trusts: For those who operate their affairs through a family trust, the ATO has released its final guidance on how section 100A applies to distributions. In light of this guidance, there are various risk-management options on the table for distributions moving forward.
Reduction in downsizer eligibility age: The eligibility age for downsizer contributions reduced from 1 January 2023. This means if you are age 55 or older, you could invest the proceeds of the sale of your family home to your superannuation outside of your standard contribution caps.
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