Property & SMSFs - Loosening The RulesWritten on the 4 August 2013 If your SMSF has borrowed money (or thinking of borrowing money) to acquire ‘bricks and mortar’ property then there are a few things you need to know. In 2011, the ATO released a ruling to clarify what you can and can’t do with property that is under a limited recourse borrowing arrangement (LRBA). The ruling addresses three key areas:
If a fund falls outside of these rules, the fund must sell the asset. Imagine having to sell a property your fund recently acquired, leaving your fund with the stamp duty, legal and agent’s fees (or perhaps making a loss because the market conditions were not as good as they were when you purchased the property). Is the property a single asset? In the ruling the ATO concedes that “it may be possible … that the trustee is acquiring a single object of property notwithstanding that it is comprised of two or more proprietary rights. However, this will only be so where … the separate proprietary rights is distinctly identifiable as a single asset.” The bottom line is that if the rights can be dealt with separately, then they are not a single asset regardless of how the trustee wants to treat them. Common examples include:
Maintenance, repair or improvement?
The ruling seems to suggest that the repair needs to bring the item back to its original condition but not go beyond that. The cost of the repair in the context of the overall asset is also likely to be a factor in the ATOs assessment of whether or not what has occurred is repair, maintenance or an improvement. Defining improvement remains a grey area as it is a matter interpretation whether something is merely repaired or maintained or has been improved. Can you improve a property? If the fund does not have to borrow money to acquire the property, then the property can be improved as long as the investment decisions are in line with the funds investment strategy (don’t forget to minute key decisions) and all other SIS requirements are met – note there are some traps when using related parties to carry out the improvements. Property and natural disasters Get advice! |
2013 The Year Ahead For BusinessesWritten on the 10th of February 2013 No age limit for super contributionsFrom 1 July 2013, the upper age limit for superannuation contributions will be abolished. Employers will be required to contribute to the complying super funds of eligible mature age employees aged 70 and older. Payslip reporting of super paymentsFrom 1 July 2013, employers will need to provide additional information about superannuation contributions on an employee’s payslip. Employers will need to report the amount and expected date of contributions they are making. Living away from homeIf you have employees living away from home, you need to know about the changes to the Living Away From Home Allowance system. The Government tightened the eligibility rules from 1 October 2012 for all new agreements entered into from 8 May 2012. Transitional rules can apply to arrangements entered into prior to 8 May 2012 but the full set of new rules will apply from 1 July 2014 or when the arrangement is modified (whichever comes first). Basically, the new rules limit the concession to 12 months in a particular work location (except for fly in fly out employees), require temporary residents and non-residents to maintain a home in Australia, and receipts to be kept for all expenses. In-house fringe benefit changesThe concessional fringe benefit tax treatment of in-house fringe benefits provided by employers under salary sacrifice arrangements was abolished from 22 October 2012 (transitional rules apply until 1 April 2014 for existing agreements). This change will particularly affect retailers providing discounted goods such as clothing, and organisations such as private schools that provide discounted education for children of employees. Previously, in-house property and residual benefits were eligible for a 25% reduction in the taxable value. While this change occurred in 2012, we are likely to see the full effect in 2013 and beyond. Building and construction industry reporting
A new reporting regime came into effect on 1 July 2012 requiring businesses in the building and construction industry to report payments to contractors. The first of these reports is due on 21 July 2013. Businesses affected by the reporting regime need to report the contractor’s ABN, name, address, gross amount paid for the financial year, and total GST included in the gross amount. |
2013 The Year Ahead For BusinessesWritten on the 10th of February 2013 No age limit for super contributionsFrom 1 July 2013, the upper age limit for superannuation contributions will be abolished. Employers will be required to contribute to the complying super funds of eligible mature age employees aged 70 and older. Payslip reporting of super paymentsFrom 1 July 2013, employers will need to provide additional information about superannuation contributions on an employee’s payslip. Employers will need to report the amount and expected date of contributions they are making. Living away from homeIf you have employees living away from home, you need to know about the changes to the Living Away From Home Allowance system. The Government tightened the eligibility rules from 1 October 2012 for all new agreements entered into from 8 May 2012. Transitional rules can apply to arrangements entered into prior to 8 May 2012 but the full set of new rules will apply from 1 July 2014 or when the arrangement is modified (whichever comes first). Basically, the new rules limit the concession to 12 months in a particular work location (except for fly in fly out employees), require temporary residents and non-residents to maintain a home in Australia, and receipts to be kept for all expenses. In-house fringe benefit changesThe concessional fringe benefit tax treatment of in-house fringe benefits provided by employers under salary sacrifice arrangements was abolished from 22 October 2012 (transitional rules apply until 1 April 2014 for existing agreements). This change will particularly affect retailers providing discounted goods such as clothing, and organisations such as private schools that provide discounted education for children of employees. Previously, in-house property and residual benefits were eligible for a 25% reduction in the taxable value. While this change occurred in 2012, we are likely to see the full effect in 2013 and beyond. Building and construction industry reporting
A new reporting regime came into effect on 1 July 2012 requiring businesses in the building and construction industry to report payments to contractors. The first of these reports is due on 21 July 2013. Businesses affected by the reporting regime need to report the contractor’s ABN, name, address, gross amount paid for the financial year, and total GST included in the gross amount. |