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ATO Guidance targeting trust reimbursement agreements now finalised The Australian Taxation Office ( ATO ) has recently finalised its guidance in relation to trust distributions and “reimbursement agreements”. This guidance impacts all clients with family or discretionary trusts. The final guidance contained within Taxation Ruling TR 2022/4 Income tax: Section 100A reimbursement agreements and Practical Compliance Guideline PCG 2022/2 Section 100A reimbursement agreements – ATO compliance approach has been developed to support trustees and their advisors, who have been requesting clearer guidance to help them manage their tax obligations. The ATO guidance has been finalised following an extended consultation period with the tax community, and recommended changes have been incorporated based on this feedback. The ATO focus surrounding Section 100A relates to trust distributions made to beneficiaries, in order to achieve a tax advantage where the funds relating to the distributions are not paid out to a beneficiary, or are in some way reimbursed back to the trustee or other parties. Whilst these final documents do not significantly depart from the draft versions released in March 2022, which gave rise to much debate on the ATO’s renewed focus on trust arrangements (see our previous Tax Alert here ), there are some notable changes (see below) and they do provide additional examples which provide further clarity for trustees and advisers as to what trust arrangements the ATO will focus their attention on.

FBT: Christmas Parties & Gifts

ATO warning to SMSFs: "Paying the price for non-compliance" There are various courses of action available to the ATO when trustees of self-managed super funds ( SMSFs ) have not complied with the super laws, including applying administrative penalties. A number of factors determine the amount of the administrative penalty, including: the type of contravention; when it occurred; and the number of penalty units that apply. For example, if an SMSF contravenes a provision in relation to borrowings during the 2021/22 financial year, the ATO may apply a penalty of 60 penalty units and, at $222 per unit for that year, this would result in the SMSF trustee having to pay $13,320. This could be even more if there are multiple contraventions. We note that the Government recently introduced a Bill to Parliament to increase the value of a penalty unit for Commonwealth offences committed on or after 1 January 2023 from $222 to $275, which may make an SMSF trustee exposed to an even larger amount after 1 January 2023. The ATO imposed total administrative penalties of around $3.4 million on SMSF trustees last year for contraventions such as trustees illegally accessing super benefits, loans, or financial assistance given to members. Also, just because a trustee receives an administrative penalty doesn’t mean the ATO won't undertake any other compliance action, such as issuing a notice of non-compliance or disqualifying the relevant entity as a trustee.

Federal Budget 2023 commentary updates Last week the Federal Treasurer, Dr Jim Chalmers, handed down the Labor Government's first Federal Budget. Following the election of the Australian Labor Party to Federal Government in May 2022, this is the second Federal Budget for this calendar year, and it updates economic forecasts and identifies the priorities for the new Labor Government. We circulated the following commentaries last week, explaining the key issues released in the budget. If you have not seen them yet, please use the links below: To read the Summary, please click here To read the Full Commentary, please click here

Summary and full commentary updates

Small Business Immediate Flood Relief Program

Queensland land tax changes have been scrapped

Bonus 20% deduction for small business investment in skills and technology

More COVID-19 business grants are now tax-free The Federal Government has expanded the list of State and Territory COVID grant programs that may be tax-free to eligible businesses. A State or Territory Government COVID grant payment will generally be tax-free if: the payment is received under a grant program that is formally declared to be an eligible program; the recipient carried on a business and had an aggregated turnover of less than $50 million in the income year the payment was received, or in the previous income year; and the payment was received in the 2021 or 2022 income year. The following Victorian and ACT COVID-19 grant programs have recently been declared as eligible grant programs for these purposes: Business Cost Assistance Program Round Two – Top Up (Victoria). Business Cost Assistance Program Round Three (Victoria). Business Cost Assistance Program Round Four (Victoria). Business Cost Assistance Program Round Four – Construction (Victoria). Business Cost Assistance Program Round Five (Victoria). Commercial Landlord Hardship Fund 3 (Victoria). Impacted Public Event Support Program Round Two (Victoria). Licensed Hospitality Venue Fund 2021 – Top Up Payments (Victoria). Live Performance Support Program (Presenters) Round Two (Victoria). Live Performance Support Program (Suppliers) Round Two (Victoria). HOMEFRONT 3 (ACT). We previously released a special Tax Alert on this topic, to see click here . ATO reminder about appointing an SMSF auditor The ATO is reminding trustees of self-managed super funds ( SMSFs ) that they need to appoint an approved SMSF auditor no later than 45 days before the lodgment of their fund’s SMSF annual return (for example, for the 2022 income year). In particular, the ATO says: “Don't risk approaching an auditor the day before you need to lodge as it will result in an overdue lodgment. Approved SMSF auditors are an important part of your lodgment and reporting obligations. They review your fund's financial statements and make sure you're complying with super law.” Importantly, an audit is required even if no contributions or payments were made to or from the SMSF in the financial year. Super comparison tool updated The YourSuper comparison tool helps individuals compare MySuper products and choose a super fund that meets their needs. It ranks the performance of these products by fees and net returns. Each year, the Australian Prudential Regulation Authority ( APRA ) assesses the performance of each MySuper product, and this information is displayed in the comparison tool. Updated information for the 2022/23 year is now available. The comparison tool provides one of the following results for each MySuper product: Performing – the product has met or exceeded the performance test benchmark. Underperforming – the product has not met the performance test benchmark. Not assessed – the product had less than five years of performance history and has not been rated by APRA. Individuals who are members of underperforming MySuper products will receive correspondence to notify them of the underperforming status. Individuals can access a personalised version of the tool which allows them to view and compare their existing MySuper products by doing the following: Log in to ATO online services through myGov. Go to the 'Super' drop-down menu and select ‘Information’, then select ‘YourSuper comparison’. To access a non-personalised version of the tool (without logging into myGov), visit: www.ato.gov.au/yoursuper Small business tax incentives back on the table The Labor Government has confirmed its commitment to implementing two tax incentives aimed at supporting small businesses to train and upskill employees, and improve their digital and tech capacity. The Technology Investment Boost and the Skills and Training Boost were announced in the 29 March 2022 Federal Budget but remain unlegislated. Small businesses with an annual turnover of less than $50 million will be able to claim a ‘bonus’ 20% deduction for eligible expenditure on: external training of employees until 30 June 2024; and the uptake of digital technologies until 30 June 2023.  The incentives will be backdated to 29 March 2022. We note that these incentives are not yet law. Rental properties and second-hand depreciating assets The ATO is reminding taxpayers that have a residential rental property, to take care when making claims for ‘second-hand depreciating assets’ used in their properties. In most cases, these are items that existed in the taxpayer's property when they purchased it, or were in their private residence (which they later rented out), such as: flooring and window coverings; air conditioners, washing machines, alarm systems, spas, pool pumps; and items used for both the rental property and the taxpayer’s own home. Since 1 July 2017, taxpayers generally cannot claim the decline in value of second-hand depreciating assets (some limited exceptions do apply). However, this rule does not apply to a property that was rented out before this date, or if it is newly built or substantially renovated (conditions apply). If you have a residential rental property, to help us get your claim right, please answer the following: When did you purchase the property? Was it a new or existing build? Did you live in the property before renting it out? When did you start renting the property? Was the asset already in the rental property when you bought it? Is the property used for business purposes? Please do not hesitate to contact your Lowe Lippmann Relationship Partner if you wish to discuss any of these matters further.