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[av_heading heading=’The News Brief_20201111′ tag=’h1′ style=’blockquote modern-quote modern-centered’ subheading_active=’subheading_below’ show_icon=” icon=’ue800′ font=” size=’6vw’ av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’20’ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=’custom-color-heading’ custom_font=’#000000′ icon_color=” margin=’0′ margin_sync=’true’ padding=’0′ icon_padding=’10’ link=’manually,http://’ link_target=” id=” custom_class=” av_uid=’av-khbs3vlj’ admin_preview_bg=’rgb(34, 34, 34)’][/av_heading]

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[av_heading heading=’What has the ATO been up to?’ tag=’h1′ style=” subheading_active=” show_icon=” icon=’ue800′ font=” size=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’15’ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=” custom_font=” icon_color=” margin=” margin_sync=’true’ padding=’10’ icon_padding=’10’ link=’manually,http://’ link_target=” id=” custom_class=” av_uid=’av-khbs46wh’ admin_preview_bg=”][/av_heading]

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PAYG withholding – new ATO schedules

If you have employees, you need to make adjustments in your payroll processes and systems to ensure the personal tax cuts announced in the Federal Budget 2020–21 (and which are now law) are reflected in your employees’ take-home pay.

You must make sure you withhold the correct amount from salary or wages paid to employees for any pay runs processed from no later than 16 November 2020 onwards.

The ATO has updated the tax withholding schedules to reflect the tax cuts. They are available on the ATO website.

Single Touch Payroll (STP) – having problems?

Are you having problems with STP? The ATO has published troubleshooting tips on its website (see Troubleshooting STP reporting) dealing with issues such as:

Need an STP exemption?

The ATO will consider granting an exemption for reporting through STP for:

Small employers with 19 or fewer employees may be exempt from STP reporting if they meet any of the following criteria:

Employers who run their business in an area with no internet service can seek an exemption for one or more financial years.

Don’t forget that a quarterly STP reporting concession may be available until 30 June 2021 for micro employers (1 to 4 employees) who use a registered tax or BAS agent.

Employers with 19 or fewer employees and are exempt from STP reporting for payment made to their closely held payees until 30 June 2021.

Tip! Your tax adviser can apply for an exemption on your behalf or let you know if you qualify for the temporary quarterly STP reporting concession.
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[av_heading heading=’Property markets across the country climb in October’ tag=’h1′ style=” subheading_active=” show_icon=” icon=’ue800′ font=” size=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’15’ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=” custom_font=” icon_color=” margin=” margin_sync=’true’ padding=’10’ icon_padding=’10’ link=’manually,http://’ link_target=” id=” custom_class=” av_uid=’av-khbs6pig’ admin_preview_bg=”][/av_heading]

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The resurgence in the national property market has continued in October, with dwelling values increasing in all states except Melbourne.

Overall the national property market increased 0.4 per cent last month according to the latest data from CoreLogic.

The strongest performers have continued to come from the smaller capital cities with Hobart, Canberra, Darwin and Adelaide all increasing in value by more than 1 per cent last month.

While Sydney values have started to rebound after declining over the past few months, up 0.1 per cent for October.

Melbourne was the only city to record a fall in values, down -0.2 per cent thanks to the extended lockdown measures.

Over the last seven months, since the lockdown measures first started coming into place across the country, national values have only fallen by 2.6 per cent in a sign of just how resistant the Australian property market really is.
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[av_heading heading=’Responsible lending laws set to be axed’ tag=’h1′ style=” subheading_active=” show_icon=” icon=’ue800′ font=” size=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’15’ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=” custom_font=” icon_color=” margin=” margin_sync=’true’ padding=’10’ icon_padding=’10’ link=’manually,http://’ link_target=” id=” custom_class=” av_uid=’av-khbsikdd’ admin_preview_bg=”][/av_heading]

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Recently, the Federal Government announced that it would be removing responsible lending laws, in a bid to free up credit and help boost the economy.

What do these changes mean for borrowers?

Responsible lending laws were introduced on the back of the Global Financial Crisis as part of the National Consumer Credit Protection Act 2009.

These laws put the onus on the lender to ensure that a borrower would be able to service a loan, or the bank could be held responsible.

The changes led to banks becoming overly pedantic on things such as living expenses which can at times be a grey area. With responsible lending laws being removed, the lender has more room to accept a borrowers claimed living expenses and if they are unable to meet their loan repayment, the bank won’t be held accountable.

For many, this is a good thing as it helps remove much of the red tape around the application process and could potentially speed up borrowing significantly.

With interest rates continuing to fall, we’ve already seen a sharp spike in the number of people looking to apply for loans and going through the approval process. This has started to cause long delays with a number of lenders and has even forced people to push back settlement dates, which impacts all parties involved in the property transaction.

According to Treasurer Josh Frydenberg, the changes have been made to help the economy recover from the lockdowns caused by COVID-19.

“What started a decade ago as a principles-based framework to regulate the provision of consumer credit has now evolved into a regime that is overly prescriptive, complex and unnecessarily onerous on consumers,” said Mr Frydenberg.

“Now more than ever, it is critical that unnecessary barriers to accessing credit are removed so that consumers can continue to spend and businesses can invest and create jobs.”

At this stage, the proposed changes will still need to make their way through parliament, however, Mr Frydenberg suggested they would be implemented by March 2021.

What Do the Changes Mean for Borrowers?

Unfortunately, removing responsible lending laws doesn’t mean that everyone will be able to take out large loans that they won’t be able to repay.

Borrowers will still have to demonstrate that they can service a loan and banks will still be making sure they will be paid back. Lenders are still be required to meet APRA’s lending standards, which require sound credit assessment and approval criteria.

What it does mean is that the process will be faster and the credit easier to access. 

For many homebuyers in Australia, this is a positive change and with interest rates continuing to fall, this might be a good time to speak to your mortgage broker.
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Varying your PAYG instalments

You can vary your PAYG instalments throughout the year if you think you will pay too much tax, compared with your estimated tax for the year.

To assist businesses affected by the COVID-19 pandemic, the ATO won’t apply penalties or interest for the 2020–21 income year for excessive variations when you make your best attempt to estimate your end of year tax. However, general interest charges may apply to outstanding PAYG instalment balances.

Variations don’t carry over into the new income year, so if you made variations in the 2019–20 income year, you may need to vary again in 2020–21. Your varied amount or rate will apply for all your remaining instalments for the income year, or until you make another variation.

Calculating and paying the right PAYG instalment amounts will help you manage your cashflow.

Tip! Talk to your tax adviser if you want to vary your PAYG instalments.

Small business CGT concessions

The small business CGT concessions (aggregated turnover under $2 million – not $10 million) are important, but very complex. Disputes with the ATO about the concessions are not uncommon.

In good news for small business, the Full Federal Court recently found that as the small business CGT concessions are intended to “help small business”, they should be construed beneficially rather than restrictively.

This approach assisted a taxpayer (Mr E) who sold a property used to store materials, tools, equipment and vehicles used in a building, bricklaying and paving business operated by Mr E (and his wife) through a family trust. Some materials, etc. were stored in two 4m × 3m sheds and other materials, etc. were stored in the open. The property was visited a number of times a day in between jobs and tools and other items were collected on a daily basis.

The Court decided that the property was “used, or held ready for use, in the course of carrying on a business” and was therefore an “active asset”. This meant that Mr E could access the small business CGT concessions to reduce the capital gain made on the sale of the property.

Tip! If you are thinking about selling a business or business assets, talk to your tax adviser about how to minimise the tax that might be payable if you make a profit on the sale.
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[av_heading heading=’SMSFs cautioned on implications of short-term related party loans’ tag=’h1′ style=” subheading_active=” show_icon=” icon=’ue800′ font=” size=” av-medium-font-size-title=” av-small-font-size-title=” av-mini-font-size-title=” subheading_size=’15’ av-medium-font-size=” av-small-font-size=” av-mini-font-size=” icon_size=” av-medium-font-size-1=” av-small-font-size-1=” av-mini-font-size-1=” color=” custom_font=” icon_color=” margin=” margin_sync=’true’ padding=’10’ icon_padding=’10’ link=’manually,http://’ link_target=” id=” custom_class=” av_uid=’av-khbskyxi’ admin_preview_bg=”][/av_heading]

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Townsends Business & Corporate Lawyers solicitor Elizabeth Wang explained that some SMSF clients see a property they want in their SMSF but don’t have enough time to arrange a bank loan before finalising the purchase, and decide to lend the money themselves and refinance shortly after.

In an online article, Ms Wang gave an example of two SMSF trustees who want to acquire a property through their SMSF via a limited recourse borrowing arrangement using a related party loan and then, straight after settlement, refinance the related party loan with a commercial lender.  

Ms Wang said there would be a number of implications to consider with this type of arrangement.

She reminded SMSF professionals and trustees that Practical Compliance Guidelines (PCG 2016/5) sets out the safe harbour terms on which SMSF trustees may structure their related party loans so that a related party loan is consistent with an arm’s length dealing.

“The ATO accepts that a related party loan is consistent with an arm’s length dealing where an LRBA has been used to acquire real property, or to refinance a borrowing used to acquire real property if a mortgage has been registered over the acquired property,” she said.

She noted that in this particular example, it may be costly and time-consuming for the trustees to register a mortgage over the acquired property between the mortgagor (holding trustee) and the mortgagee (related party lender), only to then have to discharge that mortgage for the commercial lender to secure and register its interest in the property on title.

One option, she said, may be to register a caveat against the title rather than the actual mortgage, as the registration of a caveat is slightly easier and less complicated. 

There is still some uncertainty, however, whether a caveat would provide sufficient security in the circumstances — including the relatively short time until completion of the refinance — to comply with the trustees’/directors’ duties, she cautioned.

The trustees also need to ensure they are complying with Part 6 of the SIS Act that provides statutory covenants which trustees/directors of an SMSF are required to follow when performing their duties.

“In the context of a limited recourse borrowing arrangement, the trustees/directors of an SMSF must ensure that if a default on the loan occurs that the lender will only have access to the individual property which secures the loan and not to any other property also held on trust for the SMSF by the holding trustee,” she said.

“Failing to register the mortgage securing the related party loan may constitute a breach of this statutory covenant by the fund trustee. Again, the registration of a caveat may be the answer to cover the short period until the refinance.”

While the original related party loan is only short-term step, documentation is also critical, she stressed.

“It is vital that resolutions of the SMSF trustee, the holding trustee and the related party lender be prepared and kept on the fund’s register as evidentiary documentation should a third party query a mortgage not being registered between the holding trustee as mortgagor and the related party as mortgagee,” she said.

“These resolutions should be prepared to formally record the SMSF trustee directing the holding trustee to enter into a loan refinance and for all parties to acknowledge that the existing loan is to be refinanced with the commercial lender.”
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Sources: SMSF Advisor and CFH Partners
Disclaimer: This is general information only and is subject to change at any time. Your complete financial situation will need to be assessed before acceptance of any proposal or product. The Content provided herein has been prepared for informational purposes only. The Content does not constitute tax, legal or accounting advice and should not be relied upon as such. You should seek tax, legal or accounting advice before acting or relying on any Content.

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