- As we lead up to the end of the Financial Year, if you have a trust, please ensure that you make trustee resolutions to distribute the 2017/18 Trust income by 30 June 2018. Failure to do so could result in the undistributed income being taxed in the Trustee’s hand at 45%.
- The manner of distributions are dictated or governed by your Trust deed. It is important that the trustees are familiar with the terms of their trust deed so that distributions can be made properly. The ATO has ruled that a written record is essential if you wish to effectively stream capital gains or franked dividends.
- Most trust deeds contain a default beneficiary clause which makes that particular beneficiary entitled to the Trust’s income if no other resolution is made by the 30 June. Therefore if you wish to distribute to someone other than the default beneficiary, it is important to have a resolution in place by the 30 June. Depending on circumstances, it is easier to allocate distributions by percentages rather than fixed amounts. This will ensure that any tax adjustments that might lead to a different trust income reported at year end can still be distributed out without residual income caused by the adjustments.
Taxation For Property Investors
Rental Deductions 2017-18
Due to changes in legislation, property investors may no longer be able to claim depreciation on used and second-hand depreciation assets in residential rental properties. While this has created a restriction on depreciation claims, it will also have the corresponding benefit of paying less capital gains tax when they sell the property.
Those who purchase brand new property will continue with the existing depreciation regime where these changes will not affect them. In addition, these proposed changes will only impact residential property. Commercial, industrial, retail and other non-residential properties will also not be affected.
Building allowance and claims on the structure of the properties remains unchanged. Investors will still need to obtain a depreciation schedule to calculate the deductions.
Below is a table detailing the differences between “salary” and “ordinary time earnings (OTE)”. It is important as the definition also affects the superannuation payable for an employee. Therefore the superannuation calculated is:
OTE times Superannuation Rate
OTE ($3000) x Rate (9%) = $270 (Superannuation Payable)
Employers must use ordinary time earnings (OTE) to work out the minimum superannuation contribution for their employees. If this base is different from the one in use, and the superannuation calculated is lower than the minimum threshold, the employer could be liable for the SGC (Superannuation Guarantee Charge) and also possible audit from the ATO.
|Payments to an employee in relation to:||Salary or wages?||Ordinary time earnings?|
|Awards and agreements:|
|Overtime hours – award stipulates ordinary hours to be worked and employee works additional hours for which they are paid overtime rates||Yes||No|
|Overtime hours – agreement prevailing over award||Yes||No|
|Agreement supplanting award removes distinction between ordinary hours and other hours||Yes – all hours worked||Yes – all hours worked|
|No ordinary hours of work stipulated||Yes – all hours worked||Yes – all hours worked|
|Casual employee whose hours are paid at overtime rates due to a ‘bandwidth’ clause||Yes||No|
|Piece-rates – no ordinary hours of work stipulated||Yes||Yes|
|Overtime component of earnings based on ‘hourly driving rate’ formula stipulated in award||Yes||No|
|Allowance by way of unconditional extra payment||Yes||Yes|
|Expense allowance expected to be fully expended||No||No|
|Hourly on-call allowance in relation to ordinary hours of work for doctors||Yes||Yes|
|Payment of expenses|
|Reimbursement of travel costs||No||No|
|Payments for unfair dismissal||No||No|
|returned to work||Yes||Yes|
|Parental leave – eg maternity leave, paternity leave, adoption leave||No||No.|
|Ancillary leave – eg jury duty, defence reserve service||No||No.|
|in lieu of notice||Yes||Yes|
|unused annual leave||Yes||No|
|Bonus labelled as ex-gratia but in respect of ordinary hours of work||Yes||Yes|
|Bonus in respect of overtime only||Yes||No|