Div 7a Loans and Deceased Estate

James Murphy Tax

Late in 2020 we were engaged by new clients, a family of three siblings whose mother had recently passed away, to perform their accounting and taxation work. Their Father had passed away a few years earlier and consequently they inherited various property investment companies. A number of these Companies had Division 7A loans owing, amounting to a substantial sum. Their …

Is This Payment Tax-Free?

James Murphy Tax

A client has terminated two builder employees as the next stage of the development is being outsourced to a contracted building company. One employee was on a fixed-term contract which ended. The other began with the company on 23/11/15, and the final date is 31/3/2022. This entitles him to pro-rata Long Service Leave. The company is part of a group …

Division 7a Loan Agreement

James Murphy Tax

A company makes a loan to an associate. Where there is a complying Div 7A loan agreement is the interest expense to the associate tax deductible? Answer The fundamental test for deductibility of interest as consistently applied by the Courts is the “use” test… meaning to the use to which the funds have been put. If the associate has used …

Company Tax Return

James Murphy Tax

The proprietary company (A) is a sole shareholder of another company (B), which runs a retail business.  Company A does not run the business but will receive the dividend from company B in future if B has a profit to distribute. There is no plan for company A to run other business or to earn other income other than future …

Sale of Rental Property

James Murphy Tax

I’m in the process of preparing to sell a rental property and over the years have been claiming depreciation on the building and plant and equipment. It would appear that I need a clause in the sale contract to specify how much of the sales proceeds relate to buildings and plant and equipment in order to calculate a balancing adjustment …

Personal Services Income

James Murphy Tax

We are a member of your service, and I have a question regarding the attribution of PSI. The PSE is not a PSB, and the attribution rules apply. If the PSE is a company or a trust, do the payments made to the personal services provider have to be classified as “salary and wages”? Or can it then be accounted …

Deceased Estate

James Murphy Tax

The company has one shareholder who passed away on 4.6.2018. The shareholder was changed from the deceased to a shareholder, being one of the beneficiaries. On the advice given, a dividend was declared 26.6.2020 and paid to the Estate 6.8.2020. At the same time, the Estate paid 30% and 40% of the dividend to 2 beneficiaries, and the three beneficiaries …

Tax Position – Family Trust

James Murphy Tax

I have a client who has a discretionary family trust that owns a large share portfolio that generates fully franked dividends each year. No Family Tax Election (FTE) has been prepared or lodged. The two beneficiaries are husband and wife. Since the 2011 financial year, I have allocated $50000 of fully franked income to their wife. The ATO has issued …

Rural Property Sale/Purchase

James Murphy Tax

Rural property “Carrol” purchased by my father 1924, left to my mother, brother and me not know by me 1976 – left to my two sisters by mother 1983, handled by a solicitor. I purchased from sister 2002- for $82,000. I am selling the property now – $1.5 mil. As it has been from one family member to another, are …

Distribution to Beneficiaries

James Murphy Tax

Family Trust has a Profit of $ 13,824 + Capital Gain $ 4,728 = $ 18,552 Less Cash Flow Boost Non-Accessible ($ 18,908) = ($ 356) L. The Gain is subject to a 50% Discount. As there is a loss, is there no distribution to Beneficiaries? Or do I have to remove the Gain from the equation and distribute the …

Medicare Surcharge

James Murphy Tax

A client has a Medicare levy exemption for 339 days. Being a foreign resident and not entitled to Medicare. His taxable income is $190,000 for the whole year. He has no private health insurance. Is he liable for the Medicare levy surcharge? Answer If he is subject to the Medicare levy for only 26 days, the same should apply to …

Self-Education Costs

James Murphy Tax

I have a quick question. Can international students on a student visa claim self-education costs or only when their visa status changes to temporary or permanent? My client has been told by her friends that she can claim her fees, and I said no because she is not working as a nurse, only a personal carer. Only when she starts …

Cost Base Calculation

James Murphy Tax

A married couple purchased a house in Carlton for $481,750 (incl. stamp duty) On 10/8/2000, this house was their PPR until 10/8/ 2010. At that time, they sold a 65% share of the Carlton property to their son and his partner for $550,000. The married couple purchased another property that became their new PPR, which they are still living in. …

Rural Property – Future Set Up

James Murphy Tax

I intend to purchase 200 acres of rural residential property within two years. Hopefully, the family will sell it off in 20 acre lots in 10 – 15 years. My idea is to register Ltd Company to our discretionary trust- holding seven-way membership – 10% self, 20% each for my son and daughter and 12.5% each for 4 X grandchildren. What …

Calculating CGT Liabilities

James Murphy Tax

Can I please get your assistance in this complex matter as my client is considering selling a property he acquired from his father? In this case, my client, the son, entered an agreement with his father to be added on to his father’s principal residency property “title” back in 2011 for $130,000. My client already owned another property at the …

CGT 15-Year Exemption

James Murphy Tax

Hi, this is a CGT query and whether the respective “partners” are entitled to use the small business 15-year CGT exemption and/or contribute the assessable gain into their respective super funds to gain CGT exemption. The respective “partners”, say A & B via partner A’s family trust and B via his private company, each hold 50% of the units in …

Franking Credits

James Murphy Tax

The company has excess franking credits accumulated from payment of tax at a 30% income tax rate and has not previously paid dividends. What franking credit would be applied to a fully franked dividend paid in the 2022 financial year? Answer We assume your company is a base rate entity with a turnover of less than $50 million. As of …

Stamp duty concession

James Murphy Tax

My client received a $7,000 first homeowners grant (FHOG) on his first principal place of resident property purchase in 2010. This property was purchased for $700,000, and full stamp duty was paid as there was no stamp duty concession at the time for first-time buyers (just the FHOG grant). Since this time, he has married, and his wife owns no …

Testamentary Trust – Distributions

James Murphy Tax

Details A client has passed away. Will states cash distributions to the client’s two sisters and the balance to be left to the client’s son as a testamentary trust. Cash distributions to sisters have been paid. Trust has not been set up as yet per the Lawyer. Assets of the estate include: 3 Motor Vehicles BMW Jaguar Aston Martin – …

UPE – Dividends

James Murphy Tax

Further to my conversation about UPE’S, what is the time frame for these dividends to be paid? I was under the impression that the payment had to take place within five years. Maybe I am wrong? Answer There is no 5-year requirement for the dividends. The real issue is the UPE between the discretionary trust and the company. You have a year …

GST On Sale of Goodwill

James Murphy Tax

A query relating to GST on sale of goodwill… Client A has a business of IT/Software consulting/licence sales…and currently owes software Supplier B $180,000 for licences sold to customers. Supplier B has decided to cease providing licences to Client A and has offered $180,000 in compensation…and suggested that Client A keep the $180,000 rather than pay Supplier B. Is the …

Private Company Ceasing Operation

James Murphy Tax

Australian private company is wholly owned by an overseas company (only shareholder is the overseas company – 100% ordinary shares). This Australian private company will be ceasing the operation in December. The business got a loss, so there is no need to pay company tax. This company wants to lodge the company tax return in January / February and deregister the …

Costs as a Tax Deduction?

James Murphy Tax

We have a client who employed a new worker from Queensland to work in her Outback Hotel. The client paid the costs for the flight ticket and hotel isolation. Can our client claim these costs as a tax deduction? Answer The employee can’t claim a deduction for removal or relocation costs incurred to transfer or relocate for work purposes. This …

Trust Distribution of Discount Capital Gain

James Murphy Tax

Could you advise on the information to be provided in the Trust tax return for a non-resident individual who will receive a discount capital gain from property sold in Australia by a resident Trust? And what forms, if any,  are required to pay any Australian tax liability, how the tax calculation is determined and who is required to prepare, pay, …

Benefits That Attract FBT

James Murphy Tax

We are a charity registered with ACNC and income tax-exempt. Would you advise which of the following benefits would attract FBT? Gym membership Community service day off or well-being day off Employer funded paid parental/maternity leave Flu vaccinations Rostered days off Higher super contribution by employer Paid health cover or contribution to health cover Car parking Concessional leave Christmas lunch …

LSL to cover Sick Leave

James Murphy Tax

Question: I have a staff member who has been employed for nine years as of May this year. He has no personal leave. Can he use his long service leave entitlements to cover his sick leave? He was away for surgery for five days. Answer If workers require more time off work than they have accrued in personal leave, they …

Super member investment

James Murphy Tax

Question: This question is about my client. They belong to the APSS superannuation fund with a member saving account and defined benefits. The trustee has decided to change strategy and next year 2022 and merge with Sun Super. Will the change and the merger impact member investments as their savings are invested in conservative investment options and are 68 years …

Sale of Shares

James Murphy Tax

Question: Could I have your thoughts/comments on my client’s position? He has sold all his shares to another Company that will assume the running of the business in which he and 2 others were the operators/employees/directors. They have also sold all their shares, like my client. My client’s shares sold [600,000 units] were acquired [for $900] upon incorporation some 10 …

Transfer of Livestock on Cessation of a Partnership

James Murphy Tax

Question: Just requiring verification of transfer of livestock on Cessation of a Partnership, 4 Partners in equal shares.  The livestock is transferred to 2 Sons in equal shares, and they will trade individually going forward. Can I use the election and transfer the livestock at book value, i.e.  3661 Sheep at $21966?  Also, can you please very the correct Notice …

GST on Land Sale

James Murphy Tax

Question: The client is getting old and wants to sell the land they own. It is approx. 30 acres on the edge of town. They are not registered for GST, and no business has been carried on, on the land. Meaning not having any cows, etc., on the land. They have owned the land for several decades. Do they have …