ATO focus on family trusts – Manage your Risk
The ATO has embarked on a compliance program with renewed focus on administering these rules in Section 100A of the Tax Act. Particular focus is appointing trust income to adult children.
• Section 100A requires a reimbursement agreement to exist at, or prior to, the time by which a beneficiary is made presently entitled to income of the trust.
• An arrangement that constitutes an agreement may be both informal and unenforceable, and the parties may be free to withdraw from it or to act inconsistently with it, notwithstanding their adoption of it.
There needs to be a common intention, or consensus existing between at least two parties.
Trustees should be cautious in their communications with their beneficiaries (written or verbal) to ensure no arrangements are being entered into which may be considered a reimbursement agreement.
TRUST RESOLUTIONS
Trustees of discretionary and family trusts must make valid distribution resolutions before 30 June to effectively distribute trust income to eligible beneficiaries. The resolution must be made in accordance with the Trust Deed. If the Trust has not made a valid distribution by 30 June 2023, the Trustee may be liable to pay tax on the Trust’s taxable income at the highest marginal tax rate (subject to any default beneficiary clauses present in the Trust Deed).
EMPLOYER OBLIGATIONS
INCREASE IN SUPERANNUATION GUARANTEE RATE
The superannuation guarantee rate will rise from 10.5% to 11% from 1 July 2023. The rate will subsequently rise by 0.5% each year until it reaches 12% by the 2024-25 income year.
DEDUCTIBILITY OF PAYMENTS TO WORKERS
From 1 July 2019, you must comply with PAYG reporting and withholding obligations in order to claim a tax deduction for payments you make to workers (including employees and contractors). If you fail to withhold PAYG from your workers’ payments or do not report the amounts to the ATO prior to an audit/review, they may be considered non-compliant payments and treated as non-deductible for income tax purposes.
(TPAR) TAXABLE PAYMENT ANNUAL REPORT – DUE 28 AUGUST
The following industries need to lodge TPAR information in relation to payments made to contractors:
- Building and construction
- Security, investigation, or surveillance services
- Cleaning services.
- Courier services.
- Road freight services.
- Information technology services.
SINGLE TOUCH PAYROLL
Ensure year end payroll procedures have been completed and make a finalisation declaration. You must make a finalisation declaration for your employees by 14 July 2023.