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The Treasury Laws Amendment (2017 Measures No. 2) Bill 2017, containing further amendments to the new superannuation rules kicking in on the 1 July 2017, passed both houses of Parliament in June 2017.
It is going to be possible for the government to prescribe additional transfer balance debits and transfer balance credits using regulatory change rather than legislation. Arguably, it is easier to make regulations rather than pass a bill through the Parliament. Hence if any additional items are required implementation of these is going to be quicker — or one hopes this will be the case at least.
Transfer balance debit
Transfer balance debit under item 6 in the table of transfer balance debit is adjusted as follows. If a pension from a superannuation fund that is in retirement phase stops being in the retirement phase at a particular time (the stop time) — for instance, due to failure to comply with standards — then a transfer balance debit will arise at the stop time and the value of this debit will be equal to the value of the superannuation pension just before stop time.
Note that only superannuation income streams that are in retirement phase give the superannuation fund an entitlement to gain an exemption from income tax on investment earnings.
Transition to retirement
Several important changes are in place for transition to retirement income stream (TRIS) pensions. These pensions will be able to be in retirement phase on or after 1 July 2017 provided that the pension’s recipient satisfies one of the following conditions of release:
– Retirement (101)
– Terminal medical condition (102A)
– Permanent incapacity (103)
– Attaining age 65 (106)
The numbers in parentheses refer to the items in the table in Schedule 1 of the SIS Regulations.
Also, for the first three conditions of release above, the individual must notify the trustee of the fund that he or she satisfied the relevant condition of release. The TRIS will be in retirement phase from the date the trustee is notified. It is not necessary to notify the trustee about attaining age 65.
Additionally for TRIS, there is clarification in the latest amendments that a segregated TRIS is eligible for the transitional CGT relief.
There is also a change for individuals who received a structured settlement contribution at any stage and who were also receiving a superannuation income stream in retirement phase on 30 June 2017.
In limited circumstances, the amount of transfer balance debit that arises on 1 July 2017 in respect of the structured settlement contribution will be adjusted by the value of these individuals’ pensions as on 30 June 2017.
There is a big change for limited recourse borrowing arrangements (LRBA).
The changes only apply to borrowings arising under contracts entered into on or after 1 July 2017. They do not apply to the refinancing of the outstanding balance of borrowings arising under contracts entered into prior to 1 July 2017, or to contracts that were entered into prior to 1 July 2017 but that complete after that time.
An individual will receive a transfer balance credit where a superannuation fund makes a payment of an LRBA that results in an increase in the value of a superannuation pension. It is envisaged that this transfer balance credit can only arise where the payments of an LRBA supporting a pension are sourced from assets that do not support the same pension.
Along with the new transfer balance cap that is being introduced from July 1 this year, the ATO has indicated that more “events-based” reporting will be required for it to adequately deal with the evolving SMSF regime.
Indications that this was a direction that SMSF trustees may be expected to take arose from the newly established Super New Measures SMSF Consultation Group, which met for the first time earlier this year. This group was established to ensure regular discussion between stakeholders and the sector’s regulator.
The ATO advised that due to practical implications for SMSF members there are several events that SMSFs will need to report to the ATO on an events basis for the purpose of the transfer balance cap, including:
It is understood that the ATO had proposed to introduce event based reporting for all SMSFs from July 1, 2017, but recognised there were practical issues to deal with and that trustees would require sufficient time to transition to a model of more regular events-based reporting.
Under the proposed reporting requirements, some events like a commutation of a pension would be required to be reported within 10 business days after the end of the month in which that commutation occurs. The commencement of pensions would need to be reported within 28 days of the end of the quarter.
The ATO also noted that it is expecting to issue a range of different letters to individual super fund members, including instances where an individual member:
See the SMSF New Measures Consultation Forum key messages here.
With the due date for FBT returns prepared by tax agents recently passed (the deadline was June 25 if lodging electronically), the ATO has released updated versions of five employee declaration forms that should be used from now on. These updated forms reflect changes to the FBT laws that took effect on before the last full FBT year commenced (from April 1, 2016).
Which declarations have been updated?
The five employee declaration forms that have been updated are as follows:
|Declaration||Reason for the update|
|Employee’s car declaration||To show that the 331/3% method is no longer to be used.|
|Employment interview or selection test declaration – transport in employee’s car||To reflect the multiple cents per kilometre rates based on engine type and capacity no longer applies.|
|Declaration of car travel to work-related medical examination, medical screening, preventative health care, counselling or migrant language training||To reflect the multiple cents per kilometre rates based on engine type and capacity no longer applies.|
To reflect the multiple cents per kilometre rates based on engine type and capacity no longer applies.
|Remote area holiday transport declaration|
The employer must obtain declarations from their employees before the due dates. Employee declarations do not need to be sent to the ATO. The employer (taxpayer) is required to retain them as part of their tax records. (Note that the ATO accepts electronic declarations — the declaration must be signed by the employee using an electronic signature.)
What are the declarations about?
Employee’s car declaration. This declaration applies in relation to the “otherwise deductible” rule where:
– the benefit relates to the payment of work-related car expenses
– a log book has not been kept; and
– the benefit constitutes a loan, expense payment, property or residual fringe benefit.
For income tax purposes, from July 1, 2015, car expense deductions available under Division 28 of the ITAA97 were simplified. The cents per kilometre method and log book method has been retained. However, the one-third of actual expenses and 12% of original value method have been abolished. These Division 28 amendments had consequential impacts on FBT.
Where an expense payment fringe benefit is provided in relation to a car owned or leased by the employee, the taxable value is reduced to the extent that an incurred expense would have been deductible to the employee. From April 1, 2016, only the log book method and the no-log-book and no-kilometres method is available for calculating this “otherwise deductible” amount. The no-log-book and no-kilometres method is only substantiated by the use of an employee declaration.
The “otherwise deductible” amount is calculated in the same manner for a loan, property or residual fringe benefit related to work-related car expenses.
This declaration does not apply for car fringe benefits.
Employment interview or selection test declaration – transport in employee’s car. A benefit that meets the costs of travelling to an interview or selection test, in connection with an application for employment with a new employer or a promotion or transfer with an existing employer, is an exempt benefit under s61E of the FBT Act.
If the benefit would be an expense payment fringe benefit but for this exemption, then the employer must obtain documentary evidence of the employee’s expenditure.
Declaration of car travel to work-related medical examination, medical screening, preventative health care, counselling or migrant language training. Section 61F of the FBT Act allows an exemption relating to an expense payment fringe benefit that is the reimbursement of particular work-related car expenses.
The relevant work-related car expenses are ones associated with:
– a work-related medical examination of the employee
– work-related medical screening of the employee
– work-related preventative health care of an employee
– work-related counselling of an employee or of an associate of an employee; or
– migrant language training of an employee or of an associate of an employee.
The benefit is only exempt if an employee declaration is given to the employer by the due date. The exemption is capped at legislated car expense rates.
Relocation transport declaration. An expense payment fringe benefit in respect of relocation transport is exempt under s61B if the benefit constitutes a reimbursement of car expenses and the employee provides a declaration by the due date. The exemption is capped at legislated car rates.
Remote area holiday transport declaration. Transport to enable an employee to go on holiday (including remote area and overseas employment holiday transport) are exempt benefits. Section 60A provides that the exemption of these benefits are subject to a ceiling under certain circumstances. In other circumstances, s61 allows an exemption that is not subject to a ceiling.
You can access all employee declarations from the ATO.
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