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September 2023 – Practice Update

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September 7, 2023

ATO reminders for taxpayers

As taxpayers prepare to lodge, the ATO reminds taxpayers that they should keep the following in mind:

  • Include all income: If a taxpayer picked up some extra work, e.g., through online activities, the sharing economy, interest from investments, etc, they will need to include this in their tax return;
  • Assess circumstances that occurred this year: If a taxpayer’s job or circumstances have changed this year, it is important they reflect this in their claims;
  • Records, records, records: To claim a deduction for a work-related expense, taxpayers must have a record to prove it.
  • Wait for notice of assessment: Taxpayers should wait for their notice of assessment before making plans for how they will use any expected tax refund this year;
  • Stay alert to scams: The ATO would never send taxpayers a link to log into the ATO’s online services or ask them to send personal information via social media, email or SMS.

Thinking of starting a self-managed super fund?

Stepping into the world of self-managed super funds (SMSF) can be daunting. With a range of rules and regulations to be aware of, different demands on your time for researching investments, and keeping up to date with industry changes, it’s important to understand what you might be getting into. Our award winning SMSF team is happy to discuss what you need to consider when starting your SMSF and how we may be able to help.

Different meanings of ‘dependant’ for superannuation and tax purposes

On a person’s death, their superannuation benefits can only be paid directly to one or more ‘dependants’ as defined for superannuation purposes, unless they are paid to the deceased’s legal personal representative to be distributed in accordance with the deceased’s Will.

Super death benefits can be tax-free to the extent that they are paid (either directly or indirectly) to persons who are ‘dependants’ for tax purposes.

However, the meaning of ‘dependant’ differs slightly for superannuation and tax purposes.  For superannuation purposes, a ‘dependant’ of the deceased comprises:

  • their spouse (including de facto spouse);
  • their child (of any age);
  • a person in an ‘interdependency relationship’ as defined with the deceased; and
  • a person who was financially dependent on the deceased.

However, for tax purposes, a ‘dependant’ (or ‘death benefits dependant’) of the deceased includes their spouse or former spouse (including de facto spouse) and only children under the age of 18.

Therefore, super death benefits generally cannot be paid directly to a former spouse, as they are not a dependant for super purposes.

Also, while a child of any age is a dependant for super purposes, only children under the age of 18 are dependants for tax purposes.  This means that, while a child of any age may receive super death benefits directly, those benefits will generally only be tax-free if the child is under 18.

If you are thinking about estate planning with your superannuation, please contact our office.

Luxury car tax: determining a vehicle’s principal purpose

The ATO recently explained how to determine the principal purpose of a car for ‘luxury car tax’ (‘LCT’) purposes (since LCT is not payable on the supply or importation of cars whose principal purpose is the carriage of goods rather than passengers).

Broadly, a luxury car (i.e., a car subject to LCT) is a car whose LCT value exceeds the LCT threshold.  However, a commercial vehicle that is not designed for the principal purpose of carrying passengers is specifically excluded as a luxury car.

The ATO’s new determination sets out various factors to be considered in determining the principal purpose of a car, as well as factors to consider when assessing a car’s modifications.

The determination states that commercial vehicles are unlikely to have the body types of station wagons, off-road passenger wagons, passenger sedans, people movers or sports utility vehicles, and the supply of these vehicles for an amount above the LCT threshold without LCT being paid may well attract the ATO’s scrutiny.

 

Client Webinar – Register to Join

Hughes O’Dea Corredig is hosting a zoom session at 2pm on 13th September for our clients. The session will have the Education Head of Futurity talking about education bonds. As an FYI:

  • Do not get hung up on the word education, think of it as a tax-effective ‘Family Trust’ to accumulate and distribute wealth for any purpose, which has unique tax advantages when structured with an education beneficiary(ies),
  • Tax Benefits – 30% Education Tax Benefits for Education claims / More advantages for Testamentary benefits i.e. inheritances,
  • Access – To capital at any time for education expenses and any other purpose with no tax implications,
  • Control – An Education Bond can continue post any death of a Bond Owner through the Bond Guardian feature (thus allowing for wealth to be transferred for any purpose, tax free and sits outside any will),
  • Flexibility – discretely appoint and remove beneficiaries (whether children or adults, no age limit),

Click here to Register

 

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances

 

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