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 …