COLUMNIST ARTICLES

ATO update on trust reimbursement agreements

ACCOUNTANT

By Warren Strybosch

In a media release on 5 May 2022, the ATO has “acknowledged there has been significant interest in its draft public advice and guidance relating to trust reimbursement agreements and unpaid present entitlements. In response to the level of community interest, the ATO said it will extend the public consultation period for the guidance, which ended on 29 April 2022.

ATO Deputy Commissioner Louise Clarke said "the ATO is aware that the guidance – which has been long requested by the tax adviser community – has unsettled some in that community because it calls into question some practices which have been relatively longstanding".

"The vast majority of small businesses operating through a trust are not operating in a way that will attract section 100A. A distribution to an adult child who has a low marginal tax rate will not attract section 100A where they simply receive or enjoy the benefit of their distribution".

Ms Clarke clarified that the section can only apply where a distribution is made under an agreement where there will be a payment or other benefit provided to some other entity, that will typically have a higher tax rate than the beneficiary, where a purpose of that agreement is that someone will pay less income tax.

"For example, where a full-time student receives an entitlement from a trust under an arrangement where they agree to immediately gift the entitlement back to the trustee".

"The ATO does not make law. We have not changed section 100A; 100A remains as it always has been. What we have done is publish what is at this stage draft guidance for consultation as to how we think the law applies,” Ms Clarke said.

"The ATO's position is that if the beneficiary of the trust gets the benefit, 100A has no role to play. The ATO is not concerned about ordinary family trusts where the relevant family members benefit from the distributions".

Similarly, Ms Clarke also noted that the ATO is not concerned when profits from the family business are distributed to members of the family who work in the management of the business and then that family member chooses to reinvest the profits in the business.

The ATO will not be pursuing taxpayers that entered into arrangements between 1 July 2014 and 30 June 2022 where, in good faith, they concluded that section 100A did not apply to them based on the previous 2014 guidance.

"I want to reassure the community - we won't have a retrospective element. We stand by our 2014 guidance for this interim period,” Ms Clarke said.

The ATO will carefully consider all submissions received during the consultation period as it finalises the package of public advice and guidance. A compendium of our responses to the feedback will also be published.

The question is whether this will mean the end of discretionary trusts as a taxeffective vehicle?

Lawyers are reminding accountants and family groups that the ATO does not make law and whilst they have released further guidance on the subject, it is yet to be made law and tested. They argue that there are many ‘common’ family arrangements involving discretionary trusts that will continue to be low risk. Some lawyers are going so far as to say that as long as the funds being distributed to the adult children are indeed being distributed e.g., funds going into their bank account, and regardless of how those funds are being used, this should not incur s 100A and trustees should have nothing to worry about. Some lawyers are keen for the ATO to take this matter to court as they believe the ATO will lose. However, the ATO is off the opinion that just because something happens frequently, or is accepted as a common practice, doesn’t mean it is an ordinary commercial or family dealing for the purposes of s 100A, and may challenge distributions going to adult children. Now, we wait and see, and trustees will have to decide whether to distribute funds to adult children is worth the risk this financial year.

Examples in the draft ruling include (but are not limited to) arrangements where:

• Distributions have been made to an adult child beneficiary and the entitlement to the funds representing those distributions have been applied for the benefit of another person (usually the parents), • Where an entitlement to income has been ‘gifted’ back to the trustee (or a parent) or otherwise forgiven, • Where there is a circular flow of funds (e.g., where the trust is a shareholder in a corporate beneficiary); and, • Where a trust acquires an equity interest in a corporate beneficiary under a share buy-back arrangement involving members of the family group (often the parents).

The ruling, whilst still in draft form and has raised some concerns amongst taxation professionals given the ATO have been working on draft s 100A guidance for more than 6 years. The lack of certainty for trustees and beneficiaries around the ATO’s tax administration approach will no doubt cause concern and may leave trustees at risk of assessments arising from distributions that are made going forward. Trustees should consider speaking to their accountant or lawyer with regard to s 100A if they have any concerns or doubts about their current trust distribution arrangements.

At Find Accountant, we provide SMSF tax advice. Our senior accountant is also an award-winning financial advisor. If you require SMSF advice or are considering whether or not to wind up your SMSF, then speak to Warren Strybosch at Find Accountant Pty Ltd.

Warren Strybosch

You can call them on 1300 88 38 30 or email info@findaccountant.com.au www.findaccountant.com.au

How Valuable Is Your Breastmilk?

LACTATION CONSULTANT

By Dr. Joanna Strybosch

An exciting new Tool has just been launched called the Mothers’ Milk Tool. It has been created by Australian National University (ANU) researchers in partnership with Alive and Thrive and FHI Solutions, and it allows individual mothers to calculate the value of the milk they have produced for their child.

The Mothers’ Milk Tool quantifies the volume of breastmilk and value of breastfeeding at individual, national and global levels, as well as how much is lost if country environments and policies, or healthcare, work and community settings do not enable women’s and children’s rights to breastfeeding.

“The value of breastfeeding is poorly recognised,” said the ANU’s Dr Julie Smith. “Breastfeeding and mothers’ milk is presently not counted in food systems or the economy, but it should be. The Mothers’ Milk Tool will help.”

Breastfeeding contributes importantly to a countries food supply and food security. Countries can rely on the human milk produced by breastfeeding women – from mother to baby is the worlds shortest and most reliable baby food supply chain.

In countries which do not provide enabling environments for breastfeeding there is a high percentage of lost milk. In countries where breastfeeding is common such as Ireland or the United Kingdom, around 80% of this crucial potential food supply is lost. In the United States, Brazil, Norway and Australia around two thirds of the capacity to provide human milk is lost due to in adequate protection, promotion and support for breastfeeding.

Global Human Milk Production Facts:

• Globally approximately 35.6 billion litres of breastmilk are provided each year by the world’s mothers for their babies 0-36 months.

• Around 38% of the potential global breastmilk is currently forfeited due to inadequate breastfeeding practices. • Nearly 29.1 billion litres of breastmilk is “lost” or forfeited each year from inadequate breastfeeding, which has a monetary value of US$2.2 trillion.

Dr Smith said that if the value of breastfeeding is not visible it is harder to make a case for funding the policies and programs to protect, promote and support breastfeeding. Money is the language of policymakers. Counting human milk production in food and economic statistics will assist in better policy decision-making and investments in women’s unpaid care work.

“Counting human milk is a way to value and recognise how much women add to the food system, economy and society through the care of infants and young children. When countries do not count breastfeeding or human milk in production statistics, the extent of women’s productivity and contributions to society goes unnoticed.”

The Mothers’ Milk Tool is free and can be downloaded. It has been launched to coincide with Mother’s Day to acknowledge the role, health and economic contribution of mothers to society through women’s unpaid care work, including breastfeeding. How much is your breastmilk production worth? Download the tool and find out!

Dr. Joanna Strybosch

Osteopath B.App.Sc(Clin.Sc)/B.Osteo.Sc/Grad Dip Paeds Lactation Consultant CHILDREN’S OSTEOPATHIC CENTRE www.childrensoteopathiccentre.com

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Help the local community know you exist and what sets you a part compared to other aged care facilities, Financial Planners and other providers in the local area.

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For more information, please contact us at 1300 88 38 30 or email info@findaccommodation.com.au.

WARREN STRYBOSCH

Find Group

The founder of the Find Group of companies draws on his diverse background, which ranges form teaching, to serving in the army, to taxation and accounting, to coach and help clients live their best financial lives. A multiaward winner, Warren’s innovative approach in business means he was a champion of virtual financial advice long before the pandemic. Warren established the Find Foundation, which owns and operates across Victoria.

TOP 50 MOST INFLUENTIAL FINANCIAL ADVISER IN AUSTRALIA

The financial advisers featured in this guide are a diverse group: some specialise in responsible investment advice, some provide financial advise to specific professions, and some focus on addressing market gaps, mwith several finding themselves on the list for the very first time. But they all have one thing in common: they all wield influence that can create the blueprint for the future of financial advice in Australia. Not all of them are faniliar names but just because they are not making a lot of noise doesn't mean they are not making waves. Meet our Power 50.

Farmers Fea Resurgent Mouse Plague

Jack Gramenz and Liv Casben (Australian Associated Press)

Farmers are being urged to be on the look out for mice in their paddocks amid reports of increased numbers of the rodents across Australia’s cropping regions.

CSIRO says farmers have reported increased mice activity in northern NSW, central Queensland, north western Victoria, the Yorke Peninsula in South Australia and the wheat belt in Western Australia.

CSIRO research scientist Steve Henry told AAP it can be difficult to notice growing numbers of mice before it becomes too late to combat them.

“Farmers need to get out of their vehicles and walk through their paddocks to see signs of mouse activity,” Mr Henry said.

“We haven’t reached plague proportions but we are getting reports of higher numbers across the cropping zone and farmers need to be prepared to take action to reduce numbers as they sow the winter crop.”

Millions of dollars worth of crops were destroyed during last year’s mouse plague in NSW and southern Queensland, which also caused extensive damage to farm machinery, vehicles and buildings.

Mr Henry said mice are most likely to be in the unharvested summer crops, and in the winter crop stubble where grain has been left behind.

“As it gets colder mice are also seeking shelter and are coming into houses and other buildings,” he said.

NSW Farmers Vice President Xavier Martin has urged farmers to survey their properties for signs of rodent activity in a bid to avoid a repeat of last year. “Let’s make sure we all get out of the ute and into the paddock to make sure we avoid another plague,” he said on Monday.

Some farmers have increased baiting in a bid to suppress mice numbers.

The NSW government introduced a rebate for zinc phosphide bait last year.

CSIRO data indicated patchy numbers of mice across NSW but Mr Martin said farmers were reporting more rodents running around their properties.

“What we don’t want to see is a repeat of last year’s mouse plague, so please if you see something, say something,” he said.

One third of farmers surveyed by NSW Farmers estimated their losses at between $50,000 and $150,000 during last year’s inundation.

Superannuation

- Some rule changes from July 2022 you need to be aware of

FINANCIAL PLANNING

By Warren Strybosch

The superannuation system is always changing and this makes Australian’s nervous to place their trust in it. However, not all changes are bad news. The new reforms will benefit quite a few Australians and hopefully help them have more in retirement. Many of the changes were originally announced in the May 2021 Federal Budget but took quite a while to make their way through both houses of Parliament. Some only passed in the dying days prior to Parliament rising for the 2022 Federal Election.

A. Increase in Super Guarantee percentage

For everyone who is entering the work force, the increase in the Super Guarantee (SG) will likely mean they will never have to worry about their retirement in the future. This ‘forced saving’ plan, over a 40-year period for those young adults, will provide a good nest egg for them, and it will also reduce a lot of pressure of the social security system.

From 1 July 2022, the percentage rate for the Super Guarantee (SG) increases from 10% to 10.5%. Employers need to be aware of the increase and will be required to contribute additional money into their employees’ super accounts.

Under current laws, the percentage rate will rise again to 11% on 1 July 2023. It will continue rising 0.5% each year until it reaches its final rate of 12% on 1 July 2025.

B. Removal of the $450 monthly SG threshold

This is a win for those earning low incomes who are over 18 years of age. Commencing 1 July 2022, the $450 monthly minimum wage threshold to qualify for employer Super Guarantee contributions will be abolished.

This scrapping of the monthly threshold amount means employers are now required to make super contributions for all their employees (including casual and part-time employees) regardless of how much they earn. For those under 18 and working less than 30 hours a week, this measure will not apply to them.

C. Reduction in eligibility age for downsizer contributions

For those selling their principal home after age 60, should consider the downsizer contribution. The eligibility age for making downsizer contributions into super was reduced from 65 years to 60. This type of contribution does not impact the concessional or nonconcessional caps.

From 1 July 2022, more people in their sixties can make contributions (up to $300,000 per person or $600,000 per couple) into their super account using the downsizer measure, provided they meet the eligibility criteria.

D. Increase in age limit for voluntary super contributions

Have you already retired and received an inheritance? Would you like to place those funds into super? Well, for those under age 75, now you can.

From 1 July 2022, anyone aged 67 to 74 who wishes to make a non-concessional, voluntary super contribution is no longer required to meet the work test (or work test exemption) to be eligible to make the contribution. The other normal eligibility criteria such as a Total Super Balance (TSB) of less than $1.7 million and sufficient unused annual nonconcessional contributions cap still apply.

The only exception is for people wishing to make a personal contribution into their super account and then claiming a tax deduction for the contribution. This type of personal concessional contribution still requires the contributor to meet the work test (or work test exemption).

E.Increase in age limit for salarysacrifice contributions

The age limit for making salary-sacrifice contributions into super without needing to meet the work test has also been increased from age 68 to 74. This means from 1 July 2022 eligible salary-sacrifice arrangements into super are available to anyone aged under 75 without the need to meet a work test. The other normal eligibility criteria such as a TSB of less than $1.7 million and sufficient unused annual non-concessional contributions cap still apply.

F. Increase in age limit for bringforward rule

Older super fund members who want to make a large non-concessional contribution into their super account can now do so from 1 July 2022. The reform lifts the cut-off age for using the bringforward rule to under 75 from under 67 previously.

This means people up to age 74 can use up to three years’ worth of their nonconcessional (after-tax) contribution caps over a shorter period. Eligibility to use the bring-forward rule will still depend on the contributor’s TSB at 30 June of the previous year and the total of personal contributions over the past two financial years.

G. Increase in First Home Super Saver Scheme (FHSSS) limit

From 1 July 2022, the maximum amount of eligible contributions that can be released through the First Home Super Scheme (FHSS) increases from $30,000 to $50,000. However, the annual limit for voluntary contributions eligible for the scheme remains at $15,000 per financial year.

H. Temporary reduction in super pension minimum drawdowns

The government has extended the temporary reduction in the minimum drawdown rates by 50% for accountbased pensions and similar products in the 2022–23 income year.

I. Changes to the Home Equity Access Scheme (HEAS)

Following passage of the Social Services and Other Legislation Amendment (Pension Loans Scheme Enhancements) Act 2022, older Australians who have applied to use the government’s HEAS can access lump sum advance payments from 1 July 2022. The maximum advance is capped at 50% of the maximum annual rate of their pension (including pension and energy supplements and rent assistance).

The legislation also introduced a no negative equity guarantee for HEAS participants to ensure participants with an outstanding loan balance on or after 1 July 2022 will not have to repay more than the equity they have in the property used to secure their loan.