We work seamlessly with Executors, Court Appointed Administrators and their legal representatives to ensure every aspect of the estate’s tax obligations is handled with precision. This includes the preparation and lodgement of all required returns, accurate declaration of income, application of deductions, and the identification, quantification and reporting of capital gains tax events.

Deceased Estates often involve intricate tax considerations and strict compliance requirements. We provide clear, strategic advice and practical support in areas such as:

• Lodging the Final Tax Return for the Deceased and any outstanding prior year returns
• Preparing and lodging Deceased Estate and Testamentary Trust Tax Returns as required
• Preparing Financial Accounts for Deceased Estates or Testamentary Trusts where necessary
• Providing clear, accurate beneficiary statements to ensure distributions are correctly included in beneficiaries’ personal returns
• Delivering Capital Gains Tax advice, including guidance on asset treatment and applicable time limits
• Liaising with the ATO to confirm the deceased’s outstanding tax position prior to finalising the estate
• Assisting with ongoing compliance or wind-up matters for private companies, trusts and SMSFs forming part of the deceased group
• Preparing private binding ruling applications, for example, seeking the Commissioner’s discretion to extend the two-year period for disposal of a principal place of residence
• Managing voluntary disclosures, including complex ATO liaison to obtain tax histories and reach timely, appropriate outcomes for estate finalisation
• Establishing and managing Testamentary Charitable Trusts, including compliance with Australian Charities and Not-for-profits Commission (ACNC) requirements
• Preparation and lodgement of a Foreign Resident Capital Gains Withholding certificate for a foreign Executor, where the Deceased’s main residence has been sold.

Key contacts

Heather Dyke

hdyke@sw-au.com

Deceased Estate Consulting

Taylah Cooke

tcooke@sw-au.com

Deceased Estate Consulting

The post Deceased Estates appeared first on SW Accountants & Advisors.

The contents of these pronouncements are both voluminous and complex and are still being digested, but essentially relate to the Commissioner’s views on the operation of two integrity measures – section 100A and Division 7A. 

Section 100A

What is it?

Section 100A is an anti-avoidance provision that has the potential of imposing a penal tax outcome where one person (beneficiary) is made presently entitled to trust income, but another person effectively receives the benefit of the income.  The provision was originally introduced (way back in 1979) to attack aggressive tax avoidance arrangements, but it is worded so broadly that it can technically apply to much more commonplace circumstances.

If it applies, the relevant trust income is generally subject to tax within the trust under section 99A at the top marginal rate of tax (currently 47%).

Historically, many taxpayers and their advisers have taken comfort from the rule in section 100A that ‘ordinary family or commercial dealings’ are excluded from the operation of section 100A.

What is changing?   

In recent years, it has become evident that the Commissioner has been looking to apply section 100A to circumstances well beyond its originally intended targets, and yesterday made public his detailed (preliminary) views on this troublesome provision in the form of:

• Draft Taxation Ruling 2022/D1 – Income tax: section 100A reimbursement agreements
• Taxpayer Alert TA 2022/1 – Parents benefitting from the trust entitlements of their children over 18 years of age
• Draft Practical Compliance Guideline 2022/D1 – Section 100A reimbursement agreements – ATO compliance approach

Whilst administrative guidance on this difficult subject is welcomed from a clarity perspective, the preliminary views expressed will present challenges to many and could fundamentally change the tax planning considerations for trusts and beneficiaries.

What does this mean?  

Whilst the detail of these lengthy and complex draft pronouncements is still being digested, we note the following key points:

• the Commissioner has expressed a very broad view of circumstances to which section 100A could apply
• the Commissioner has expressed a very narrow view of when the ‘ordinary family or commercial dealing’ exception is likely to apply.

The Commissioner has indicated that section 100A could apply to the following circumstances, including:

• gifts from individual trust beneficiaries on low marginal tax rates to other family members with a higher marginal tax rate – for example, gifts or reallocations from adult children that have unpaid trust distributions to their parents.
• a pattern of behaviour involving continuous gifts from beneficiaries back to the trust or even circumstances involving accumulation of unpaid trust distributions with the funds being retained in the trust
• non-commercial loans between family members funded by income distributions from a trust
• manipulation of income of the trust estate and net income.

The examples referred to above have far reaching implications for trusts and their beneficiaries (including corporate beneficiaries).  The approach that Commissioner proposes to adopt represents a significant departure from arrangements that many family groups will have adopted in the past.

The Taxpayer Alert TA 2022/1 specifically identifies circumstances which the Commissioner regards as high risk in relation to distributions to children of parents who control a discretionary trust.  The TA not only addresses 100A, but indicates the distributions may be legally ineffective or subject to Part IVA.

When will this new approach apply from?

The draft ruling indicates that the approach will apply retrospectively as well as prospectively, subject to some concessions set out in Draft Practice Compliance Guideline PCG 2022/D1.  This is significant, as section 100A (being originally intended for aggressive tax avoidance measures) is not subject to any statutory time limits – it can be applied retrospectively indefinitely, without the usual limitations upon the Commissioner.

Unfortunately, the draft PCG only provides limited concessions for arrangements entered into prior to the release of the pronouncements referred to above.  In very broad terms, certain pre-existing arrangements that are regarded as relatively benign will not be reviewed by the ATO. The limits to these concessions is one of the elements of the new suite of drafts that we believe is worthy of further dialogue and submissions in an effort to seek an outcome that is less harsh.

The PCG also provides something of a ‘heat map’ for taxpayers and advisers to rate the risks of arrangements under section 100A.

Division 7A – complying subtrusts no longer permitted

In addition to the section 100A developments, the Commissioner has also issued a draft determination in relation to Division 7A (TD 2022/D1: when will an unpaid present entitlement or amount held on sub-trust become the provision of financial accommodation). Whilst this TD is quite lengthy, the essence of it is that the Commissioner has announced a prospective (from 1 July 2022) change to his previous approach under which he allowed unpaid trust distributions owing to a company beneficiary to be put on interest-only terms for a 7 or 10 year period (depending on the interest rate).  The new approach will be more challenging for taxpayers in that such unpaid entitlements will need to be put on complying Division 7A loan terms, which broadly require both interest and principal repayments annually.   

Next steps

Section 100A in particular is a very technical and difficult provision and there is much to digest in the pronouncements referred to above.  SW will be considering the draft guidance in detail and propose to make submissions to the ATO prior to the finalisation of these pronouncements. 

Another factor to bear in mind (which is also referred to by the Commissioner in the draft ruling) is that the recent Guardian case concerning the operation of section 100A (refer to SW summary here: Guardian case – section 100A win for the taxpayer (sw-au.com), which was decided in favour of the taxpayer, is subject to appeal.  The draft views expressed appear to have been formed without any major regard to this decision, so the outcome of this appeal will be particularly relevant in this context. 

In addition to making submissions to the ATO in respect of these drafts, SW will be closely monitoring developments in this area and will keep its clients well informed as circumstances evolve.

Contributors

Ophelia Katrivessis

Ned Galloway

The post Trust distributions – the game has changed appeared first on SW Accountants & Advisors.

Whether you’re a family business owner, producer, manufacturer or professional, our experts will work with you and your other advisors to ensure your estate and financial affairs are structured, secure and tax effective.

Our estate management services include:

• estate planning & advisory
• protective and testamentary trusts
• setup of Trusts for property & wealth
• Self-managed Super Funds (SMSF)
• wealth transfer
• property and loan management
• charitable giving
• Trustee roles
• interim and long-term oversight.

The post Estate & succession planning appeared first on SW Accountants & Advisors.

Each session will focus on topics that are of particular importance when putting a strategy in place to deal with your assets and investments when you pass away.

You are welcome to share this page with anyone who might be interested in attending.

Webinar 1 (24 August 2021): 101 Estate Planning

Discover the legalities and different aspects of Estate Planning to ensure you have a solid background before we look at the variations and pitfalls of creating a Will in the world of the modern family, in session two.

Experts from SW and Burke & Associate Lawyers discussed:

• Choosing your Legal Personal Representative
• What assets are part of your Estate?
• Non-estate assets and how to deal with them
• Overseas assets – do you require multiply wills for different jurisdictions?
• Beneficiaries with special needs
• Nominating beneficiaries and superannuation – The recent case of Ashleigh Petrie and Magistrate Rodney Higgins
• Testamentary Trusts
• Case study – celebrity Will disaster.

Webinar 2 (14 September 2021): The modern family and the challenge to your Will

Discover the variations and pitfalls of creating a Will in the world of the modern family before we look different aspects of a Power of Attorney and how they operate, in session three.

• Blended families
• Strategies to minimise risks of challenges to Will
• Business succession
• SMSF – Business real property leasing to related party
• Guardianship of children
• Establishing a charitable trust
• Online presence
• Case study – Joss v Joss: The successful $3.225 million challenge.

Webinar 3 (12 October 2021): Powers of Attorney

To wrap up this webinar series, our expert speakers discovered the different aspects of a Power of Attorney (POA) and how they operate.

• Current POA under Victorian Law and what jurisdictions are they legally enforceable
• What are the obligations of the POA and how should it be carried out?
• How to handle discretionary support for family members
• Things to do before POA implemented
• What happens if you do not nominate an enduring power of attorney?
• POA’s and SMSF – general v enduring; early release of super
• Advanced Healthcare Directives
• VCAT applications
• Case study – gifts and payments to family members.

Click here to find out more about our upcoming and past events.

Series speakers

Matthew Oakey Director, SW	Rohani Bixler Special Counsel, Burke & Associates Lawyers
Heather Dyke Associate Director, SW	Keegan O’Rourke Senior Advisor, SW

Contact us

If you have any queries or would like more information, please contact the Marketing team via marketing@sw-au.com.

The post Estate Planning & Power of Attorney webinar series appeared first on SW Accountants & Advisors.