Monthly tax special topic

The rising property values and the housing shortages in desirable urban localities present an opportunity for residents to realise some of the wealth tied up in their expensive backyards. The decision to embark on subdividing the property and building a residence that will be in keeping with the streetscape and sympathetic to the existing house as well as returning a profit that might reduce or eliminate the existing mortgage does carry with it some potentially complex considerations.

This session will cover the taxation and GST implications for an individual realising the wealth tied up in their backyard by adopting any of the following development strategies:

• subdividing and selling the vacant lot
• subdividing, building a residence and selling the new residence
• subdividing, building a residence, renting it for a time and eventually selling it
• subdividing, building a residence, moving into the new residence and selling the old residence.

Directors can also be made personally liable for some of their company‚Äôs tax debts such as PAYG withholding, superannuation guarantee, GST and the LCT and WET if the director fails to take the necessary action specified in the Tax Administration Act 1953 (TAA).

As the economy slows, directors of distressed small businesses may need to consider the simplified debt restructuring process as an avenue to get their company back on track without having to appoint a liquidator.

This session will cover:

• Broad duties imposed on company directors
• How Tax Law applies responsibility through the Director Penalty Notice (DPN) regime
• For PAYG withholding, Superannuation Guarantee (SG), GST, LCT and WET:
  • Commissioner‚Äôs power to issue estimates for recovering unremitted PAYG and SG charges
  • Defences available to directors against personal liability for company tax debts
• Implications of company tax debt for insolvent trading
• Using the small business restructure plan to get the company back on track

The net (taxable) income of a trust is worked out in much the same way as for other resident taxpayers.

Establishing who is liable for the tax on that net income turns on concepts of trust income, as determined under the trust deed, and present entitlement to it which is usually created by irrevocable resolution of the trustee.

Making beneficiaries presently entitled to trust income, or not, engages the operation of Div 6 of the ITAA 1936; making beneficiaries specifically entitled to amounts such as franked dividends and capital gains engages the streaming provisions. A trustee‚Äôs power to stream different components of its distributable income to different beneficiaries may have unforeseen consequences for tax purposes because the Tax law currently only accommodates streaming of franked dividends and capital gains. 

Help for completing the 2026 trust tax return is available in the ATO‚Äôs 360-page instructions 

The total value of residential dwellings in Australia has been reported as being around $10.4 trillion. Housing is the largest source of wealth for most Australian retiree households. The expected massive wealth transfer over the next decade from the wealthy boomer cohort to the next generation, will raise questions about the tax consequences for the transfer of the currently tax-exempt main residence to beneficiaries.

This session will cover how the main residence CGT exemption (the MRE) in Subdiv 118-B applies on disposal of a dwelling that:

• was acquired by the deceased before 20 September 1985 jointly with their spouse who subsequently died
• passed to an individual beneficiary or trustee of a deceased estate
• was used by the deceased to produce assessable income during some part of their ownership
• was inherited from someone who inherited it themselves
• was acquired from a deceased estate
• is subject to a life tenancy.

Section 100A of the ITAA 1936, an integrity provision, has received a lot of attention recently. We consider its implications for distributions from trusts having regard to:

• what is an ordinary family or commercial dealing
• the Court decisions in Guardian and other significant cases
• the ATO‚Äòs guidance
• the importance of documentation and other risk management strategies.

This topic covers the common CGT rollovers available to taxpayers that realise a capital gain:

• The same asset roll-overs - Subdivs 122-A, 122-B, 124-N, 126-A and 126-B; 126-C, 126-D, 126-E, 126-G
• Replacement asset roll-overs - Subdivs 122-A, 122-B, 124-B, 124-C, 124-D, 124-E, 124-F, 124-I, 124-J, 124-K, 124-N, 124-P, 124-Q, 124-R and 124-S
• Scrip for scrip roll-over - Subdiv 124-M
• Demerger roll-over - Div 125
• Roll-overs for business restructures - Div 615
• Small business restructure roll-over - Subdiv 328-G

This topic covers the basic conditions that must be satisfied for a taxpayer to access the small business CGT concessions, namely:

• the 15-year exemption
• the 50 per cent reduction
• the retirement exemption
• the small business roll-over.

It further includes:

• the four basic conditions which an entity must satisfy for eligibility for the small business CGT concessions in Div 152
• the additional conditions that must be satisfied where the relevant CGT asset disposed of by the taxpayer consists of shares in a company or an interest in a trust.