- Testamentary trusts. A strategy that seemed to have been increasing in use was the injection of additional income or assets into a testamentary trust. Amendments in the budget now limit the tax concessions to assets of the estate and income related to those assets.
- Instant asset write off. No need to panic about the $20,000 instant asset write off for small business enterprises as it has been extended by 12 months.
- Division 7A. The rules will be clarified to ensure that unpaid present entitlements (UPEs) come within the scope of Division 7A. There is little detail but one would expect this means that UPEs will be deemed to be Division 7A loans and the current arrangements under the ATO’s rulings and guidance no longer apply. In addition the Division 7A simplification measures announced in the 2017 budget will now have a deferred start date of 1 July, 2019.
- Property Developers and Land Banking. There are proposals that will limit deductions that are available for holding vacant land where it is not genuinely held for the purpose of earning assessable income. This means interest costs will be treated as non-deductible unless additional documentation is maintained that there is a genuine assessable income purpose. This could have a serious implications for the cash flow of property developers who are land banking. Note instead of a deduction there will still be a cost base adjustment.
- Professional partnerships and small business CGT concessions. A common recent approach is that many partners of professional partnerships now hold their partnership interests (rights to income) as, or via, a discretionary trust. It appears that a budget announcement means that the disposal of that interest is no longer able to access the small business CGT concessions and consideration should now be given as to what the appropriate structure should be going forward.
- Continuing and increasing the attack on Phoenix arrangements. DPN will be extended to GST. As part of the government’s ongoing attack, and quite validly, on Phoenix arrangements, the director penalty regime will be expanded to include GST, making directors personally liable for the company’s outstanding GST debts. One expects that this would have been an easier solution than the upcoming GST withholding for purchases of real property.
- One for the cricket nuts. There is a five year income tax exemption for the subsidiary of the International Cricket Council for the ICC World Cup in 2020, which will be held in Australia, which also includes a withholding tax exemption for that entity. OK, so it is not actually relevant for SME advisers directly but I thought I would throw it in the mix.
Author – David Marschke