Electronic Conveyancing will be implemented throughout NSW by the end of 2014, which means that Solicitors and Conveyancers will be able to conduct most elements of conveyancing transactions electronically. Continue Reading..
Unpaid Present Entitlements owed by a Trust to a corporate beneficiary can be taxed in the hands of the Trust pursuant to Division 7A if the UPE arose after 16 December 2009 and has not been paid out.
That is, if the Trust and corporate beneficiary form part of the same family group and the company has knowledge that the funds representing its UPE are being used by the trustee for trust purposes, this can be treated as a Division 7A loan from the company to the trustee. Continue Reading..
It is often necessary/desirable in a family law situation for a payment of money to be made from a family company to a spouse. Division 7A has always been a concern. Many practitioners have relied on a private binding ruling which indicated the ATO's acceptance that section 109J exempted such a payment provided there was a Family Court order against the company requiring the payment to be made. The ATO recently informed us that a public ruling is to issue later this month reversing that position. So that in future, it appears, all payments from family companies to spouses in a family law situation will potentially be subject to Division 7A. Hopefully the ruling will not be retrospective. Continue Reading..
It is important that each farm has the most appropriate structure for their circumstances. Many successful farm businesses fail when the current owners die because they do not have a succession plan. Other business structures are a source of family unhappiness because no thought has been given to the inevitable transfer of a business between generations. Continue Reading..
There's a push by promoters to convert property owning hybrid and discretionary trusts to unit trusts so as to avoid denial of the land tax free threshold to such trusts as "special trusts". The ones we have seen seemingly rely on DUT 17 for stamp duty relief and TD 2012/21 for CGT. But those contemplating the exercise should consider: Continue Reading..
In ATO ID 2013/15 the ATO has opined that an unpaid present entitlement is not a "debt” for the purpose of claiming a deduction when written off as a bad debt. The ID refers to TR 2010/3 ruling that an unpaid present entitlement creates rights in equity but not, without more, the status of a debtor – creditor relationship.
The bad news is that if an unpaid present entitlement turns bad you can't claim a tax deduction for it as a bad debt. The good news is that (assuming the ATO holds the opinion for all purposes) we seemingly don't have to worry about Division 7A assessments for unpaid present entitlements in favour of companies on the basis of debt forgiveness. Continue Reading..
“The decision in Clarke means the approach formerly set out in the Statement of Principles is not sustainable”. On 24 October 2012 the ATO released Taxation Determination TD 2012/21 as the final version of Draft Taxation Determination TD 2012/D4.
TD 2012/21 states that amendments to a trust will not create a new trust unless:
1. The changes causes the existing trust to terminate and a new trust to arise for trust law purposes; or
2. the effect of change … is such as to lead to a particular asset being subject to a separate charter of rights and obligations such as to give rise to the conclusion that that asset has been settled on terms of a different trust. Continue Reading..
After copping a bit of a thrashing in some recent Court cases the ATO recently released Draft Taxation Determination TD 2012/D4 which when finalised will revoke and replace the current Statement of Principles on trust resettlements.
The draft determination states that amendments to a trust will not result in a resettlement:
1. unless the amendment causes the trust to terminate for trust law purposes; or
2. the effect of the amendment is to lead to a particular asset being subject to a separate charter of rights and obligations such as to give rise to the conclusion that that asset has been settled on terms of a different trust. Continue Reading..