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Sky Update – October 2016

In this Sky Update, we bring you all the latest tax news along with some other items that may pique your interest.

Budget superannuation changes on the way

The Federal Government has been consulting on draft legislation to give effect to most of its 2016–2017 budget superannuation proposals. The following is an update on some of the key changes:

Deducting personal contributions

All individuals up to age 75 will be able to deduct personal superannuation contributions, regardless of their employment circumstances. Of course, deductible contributions will be limited by the concessional contributions cap of $25,000, proposed from 1 July 2017.

$1.6 million transfer balance cap

The total amount of accumulated superannuation an individual can transfer into retirement phase (where earnings are tax-exempt) will be capped at $1.6 million from 1 July 2017.

Those with pension balances over $1.6 million at 1 July 2017 will be required to “roll back” the excess amount to accumulation phase.

Concessional contributions cap

The concessional (deductible) contributions cap is to be reduced to $25,000 for all individuals (regardless of age) from 1 July 2017.

The Government has also decided to:

  • dump the proposed $500,000 lifetime cap on non-concessional contributions;
  • not proceed with the proposal to remove the work test for making contributions between ages 65 and 74; and
  • defer to 1 July 2018 the start date for catch-up concessional contributions for superannuation balances of less than $500,000.

Please refer to our recent blog for further details.

The government intends to introduce the proposed changes to Parliament before the end of the year.

SMSF related-party borrowings

The ATO has issued a taxation determination (TD 2016/16) concerning whether the income of a SMSF would be “non-arm’s length income” (NALI), and therefore attract 47% tax, when the SMSF has entered into a limited recourse borrowing arrangement (LRBA) on terms which are not at arm’s length.

The ATO has also updated a practical compliance guideline (PCG 2016/5) which sets out the Commissioner’s “safe harbour” terms for LRBAs. If an LRBA is structured in accordance with the guideline, the ATO will accept that the LRBA is consistent with an arm’s length dealing and the NALI provisions (47% tax) will not apply.

Trustees who do not meet the safe harbour terms will need to demonstrate that their LRBA was entered into and maintained consistent with arm’s length terms.

The ATO has allowed a grace period to 31 January 2017 for SMSFs to restructure LRBAs to be consistent with the safe habour terms (or bring LRBAs to an end before that date).

Transport of bulky tools claim denied

An individual has been unsuccessful before the Administrative Appeals Tribunal in a matter concerning deductions for work-related travel expenses.

The taxpayer argued that his employer required him to supply his own tools and that they were too bulky to be transported to work other than by car. He also argued that the employer did not provide secure storage facilities for his tools.

In refusing the taxpayer’s claim, the Tribunal noted it was the taxpayer’s own choice to transport his tools based on his security concerns, which were “not supported by objective evidence”. The taxpayer’s claim was therefore refused.

The ATO has reminded individuals to make sure they get their deductions right and noted that they will contact employers to verify employees’ claims as they did in this case.

Remember to lodge

All taxpayers who are “self-preparer’s” need to ensure that their 2016 income tax return is lodged with the ATO by no later than 31 October 2016.

All other taxpayers who use a Registered Tax Agent (eg Sky Accountants) have access to extended due dates with lodgement falling due on 15 May 2017 for most.

Any self-preparers who would like to access these extensions need to get themselves onto a Tax Agent Lodgement program as soon as possible.

SuperStream deadline fast approaching

The extension to 28 October for small businesses to become SuperStream compliant is fast approaching.

Any small businesses that are yet to implement a SuperStream solution need to act promptly.

For more information, please refer to our previous blog or contact one of our offices.

Energy Assessment Grants

Sustainability Victoria is calling for applications to the Boosting Productivity energy assessment grants program for small and medium sized businesses.

Grants will be offered to businesses with less than 200 full time employees, spending over $20,000 pa on energy, to enable them to carry out an energy assessment, and identify and implement energy improvements.

Funding is available to cover 50% of the cost of an energy assessment at two levels:

  • A basic energy assessment which provides up to $2,000 towards the cost of an assessment. Recommended for businesses spending between $20,000 and $50,000 on energy pa;
  • A detailed energy assessment which provides up to $6,000 towards the cost of an assessment.Recommended for businesses spending > $50,000 on energy pa.

A $3,000 implementation bonus is available under both grant types to carry out one or more assessment recommendations, which will result in a reduction in energy at the business site.

Penalty rates case – Retail & Hospitality

The Fair Work Commission is reviewing penalty rates in a number of retail and hospitality awards as part of a 4 yearly review of modern awards.

Many are hopeful that the recommendation of the Productivity Commission to reduce Sunday penalty rates will be taken on-board by the Commission.

The Commission’s decision was expected to have been handed down in September. However, the decision has been delayed as a result of the scheduling of an additional hearing.

It is now anticipated that the Commission’s decision will be handed down in late 2016.

With peak season in the retail and hospitality sectors fast approaching, businesses need to continue to budget for existing penalty rates. Businesses can also make use of the Fair Work Ombudsman’s pay and conditions tool (PACT) to ensure that they are compliant.

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