30/03/2010

INDEX VALUES FOR 2010/2011

The Tax Office has released the indexed values of the various super caps which will apply for 2010/11.  In short:

o   the Concessional contributions cap will be $25,000 (no change)

o   the Non-Concessional contributions cap will be $450,000 (no change)

o   the low rate cap (for superannuation lump sums) will be $160,000  (up from $150,000)

o   the CGT lifetime contributions cap will be $1.155m (up from $1.1m)

The maximum SG super base for 2010/11 or the co-contribution thresholds for 2010/11 are yet to be released. 

RECENT SUPER GEARING ANNOUNCEMENTS

On 10 March 2010, Chris Bowen MP, Minister for Financial Services, Superannuation and Corporate Law announced proposed changes to corporations laws to deem certain arrangements under section 67(4A) of the SIS Act as “financial products”.  This will mean (amongst other things) that the arrangements may only be offered by licensed financial services providers.

The Minister also announced proposed tax legislation amendments so that a trustee of a super fund who enters into a gearing arrangement which satisfies section 67(4A) would be treated as the owner of the acquired asset for the period the loan is being repaid.  The effect of the proposed change is that there would be no CGT event for the super fund when the last loan repayment is made.

On the same day, Senator Nick Sherry announced the tax legislation amendments would also confirm the practice of treating investors in an instalment warrant over an exchange traded security in a company, trust or stapled entity as the owner of that security.  Again, the aim is to prevent a CGT event occurring when the final loan repayment is made.

The Government has called for submissions to be made in respect of these proposed changes and has released a Proposals Paper.  When the legislation is eventually passed, it will apply from the 2007/08 tax year.  Until the legislation is passed, the precise effect will not be known.  It seems that the intention of the Government is to clarify and remove uncertainty in this area.

TAXPAYER ALERT

On 29 March 2010, the Tax Office released Taxpayer Alert TA 2010/2.  The Alert explains the Commissioner’s view of clauses in SMSF deeds that attempt to prevent excess contribution tax liability.  Typically these clauses state that excess contributions are held on a separate trust by the SMSF trustee and accordingly do not count towards members’ contribution caps.

The Commissioner considers these clauses are ineffective in avoiding excess contributions tax and may be a breach of the sole purpose test by the trustee. 

ATO RULINGS

The Tax Office has also released Self Managed Superannuation Funds Ruling SMSFR 2010/1 (finalises draft ruling SMSFR 2008/D2) and Taxation Ruling TR 2010/1.

SMSFR 2010/1 sets out the Commissioner’s view on whether an asset acquired by an SMSF trustee from a related party breaches the SIS acquisition rules. It addresses the meaning of the phrases “intentionally acquire”, “acquire an asset” and “related party” and also discusses the various exceptions to the acquisitions rules.

TR 2010/10 explains the Commissioner’s views as to the meaning of the word “contribution” and how and when a contribution is made.  It also addresses various rules in Division 290 of the 1997 Tax Act that apply if an employer or personal contribution is to be deducted.