Statutory wills are underutilised in estate planning

Statutory wills are being neglected in situations where a family member has lost capacity with the absence of an established will, according to Australian Unity Trustees.

Australian Unity Trustee’s national manager of estate planning, Anna Hacker said one of the main issues she sees as an estate planner is families who “don’t realise” that they can establish a statutory will in the case that their loved one had not formed a will prior to developing the disease.

A statutory will functions the same as a personal will, however is proposed by someone else, she explained.

“I think it's certainly an important thing for people to remember. A lot of people don't realise you can do it [propose a statutory will], and they think: ‘oh no, well, mum's got dementia, so there's no way we can do a will now’.

“[However] the reality is you can and it can mean that the court can look at it in a much more objective way and really think about what that person wanted whereas after someone passes away there's more litigation.”

She said that, to her, “it makes a lot more sense” to propose a statutory will before the parent or family member passes away, especially if “you know it’s going to be a fight”.

Pointing to a recent case where a young child had severe physical disabilities due to problems at birth, Ms Hacker said statutory wills don’t just apply to the elderly.

She explained that this child had received $3.2 million in damages against the hospital which had been used to produce an income and buy a house for him, his siblings and his mother. His father had had little to do with him and his mother was the primary carer.

“The child was about to undergo serious surgery and an application was made for a statutory will to be made on his behalf, as he had never had capacity to create his own will.

“The court eventually approved a will that left the majority of the estate to the mother and siblings, with a small portion allocated to the father.

“Without the statutory will, the father would have been able to claim part of the family home and the funds, which would have seriously affected the other children and their mother.”

Ms Hacker added that while statutory wills are often considered as a last resort, there can be a greater role for them in estate planning.

“If a person has lost capacity, or indeed, never had capacity, it is entirely appropriate to look at whether a statutory will can be made.

“Often, statutory will applications are accepted by all parties and can allow for inclusion of strategies such as discretionary testamentary trusts,” she continued.

By: Lucy Dean
23 NOVEMBER 2017
smsfadviser.com

Our Advent calendar for 2017

On behalf of all our staff we wish our clients a Merry Christmas, Happy New Year and a great holiday period.

Come back each day for an inspirational quote or poem about Christmas, summer and life in general from the likes of Banjo Paterson or Charles Dickens.

Open the Advent Calendar

Treasury finds Australia ‘increasingly uncompetitive’ as US moves on tax plans

Treasury has released a research paper detailing the implications of the US corporate tax reforms, highlighting its real potential to quash Australia’s competitiveness and stifle local wages.

The US recently released a framework for US tax reform, including a reduction in the federal corporate tax rate from 35 to 20 per cent, sparking concerns that it might attract an investment boom, leaving Australia behind.

The research paper, US Corporate Tax Reform: Implications for the rest of the world, raises the concern that an increased investment in the US will result in a permanent reduction in the level of GDP and real wages in Australia.

“The US reforms have the potential to accelerate tax competition between jurisdictions, making Australia’s current corporate tax rate increasingly uncompetitive internationally,” stated the report.

“While the US would experience higher GDP and real wages, other countries, including Australia, could experience a permanent reduction in the level of GDP and real wages unless they take steps to maintain their competitiveness.”

The paper also examined how countries such as the UK, Singapore, and Canada have cut their rates over the past decade in a bid to spur investment and drive economic growth, with the current OECD average at 24 per cent, down from 32 per cent in 2000.

However, Treasurer Scott Morrison believes the Enterprise Tax Plan, which aims to reduce the tax rate to 25 per cent for entities with turnover of up to $50 million, will “shore up our competitiveness on investment”.

“This is why the Turnbull government’s fully-funded Enterprise Tax Plan currently before the Parliament, will act to ensure Australia remains an attractive destination for investment,” said Mr Morrison.

According to Treasury modelling however, the size of the Australian economy will permanently increase by just over 1 per cent in the long term following the 5 per cent reduction in the corporate tax rate.

BDO national tax director Lance Cunningham believes that while tax reforms in Australia will now be a necessity, it has called for rational decision making, while cautioning against “knee jerk reactionary responses”.

“If the government is not careful, the US tax rate cut may result in Australia implementing protectionist counter measures rather than well thought-out tax reform driven by a need to boost the Australian economy,” Mr Cunningham said.

“Whatever the outcome, Australia should refrain from embracing unilateralism which is a path of incoherence and ultimately lower growth.”

By: Jotham Lian
09 NOVEMBER 2017
accountantsdaily.com.au

Australia’s vital statistics

A truly fascinating set of numbers about our great country. Almost 150 different items covered.

Please click on the following link to see all this interesting information. The areas covered are:

Overview
Markets
GDP
Labour
Prices
Money
Trade
Government
Business
Consumer
Housing
Taxes
Climate

Access all this data here.

tradingeconomics.com

Resources on our site to help you, your family and your friends.

Your Financial Planner supplies you with more tools and resources than most others and at no extra cost. Use them to improve your planning for the future.

24/7 access to website based tools you, your family (children as well), your friends, colleagues and associates can all benefit from. *

Latest News. Our articles are chosen from amongst 30-35 to ensure the best are included in our news updates. The range of topics covered has also been broadened to include insurance, bookkeeping, and health issues.
Comprehensive financial tools to help you understand your Personal or family Cash Flow position or simply complete a Budget or work on some Superannuation scenarios.
Research your questions at the ATO, ASIC, Centrelink and other relevant sites to better understand what happening in areas such as Superannuation, Employer responsibilities, Awards, Pensions, etc. Then discuss your questions with your Planner. Use eWombat for doing this research, type in keywords or phrases.
Your information is private and confidential and should be treated that way. Using Secure File transfer or a vault means your information and plans are encrypted when sent in either direction.

Portfolio logins. Utilise the ability to login to your Portfolio 24/7 to see how it is going compared to your Plans.
Online forms. More and more forms are now website based versions to save time and effort with printing and posting. By using such resources many Planners can also keep abreast of changes in your circumstances and this will always help them better plan your financial future.
ASX Prices and Charts. Many sites will have these resources to allow you to quickly see how the market is going and check any stocks you’d like a price on. All such information is, though, delayed by 20 minutes.
A stock ticker that displays 5 minute delayed information for the top 100 Australian stocks by market capitalisation.

* Not all services are on every planner’s website but most are.

No Special Circumstances to allow Excess Super Contributions

Another case confirms that taxpayers making large superannuation contributions need to be diligent.

The Administrative Appeals Tribunal denied a taxpayers request to ignore excess contributions tax.

The taxpayer claimed that her situation and the complexity of her superannuation arrangements, meant that special circumstances should allow the Commissioner to overlook her excess contributions.

She had contributed what she thought was the maximum in year one and used the bring forward rule to contribute $450,000 in the year two. She argued that part of the complexity was an industry fund, a defined benefit fund and her SMSF. Having exceeded the maximum concessional contributions in year one, the bring forward rule was not available in the year two.

The tribunal considered that her superannuation arrangements were not out of the ordinary and emphasised her failure to seek advice and disregard reports from her superannuation fund, in favour of spreadsheets prepared by her husband.

The decision is quite predictable, again emphasising great care when endeavouring to take maximum advantage of tax concessions.

AcctWeb

‘A bad thing times 10’: ATO set for new SMSF blitz

The status of tens of thousands of SMSFs currently hangs in the balance, with the post-reform environment prompting the ATO to threaten axing funds which are not meeting their reporting obligations.

The status of tens of thousands of SMSFs currently hangs in the balance, with the post-reform environment prompting the ATO to threaten axing funds which are not meeting their reporting obligations.

The advent of changes such as the transfer balance cap requires the tax office to have significantly more up to date data on a fund’s assets and activity, pushing on-time lodgment further up the ATO’s compliance hit list.

About 40,000 funds which have not met their lodgement obligations are now at risk of being made non-complying, the ATO’s outgoing superannuation director Howard Dickinson said.

“I assume that all of you know non-complying outcomes, but I shall re-state it for the purpose of being very obvious: 50 per cent of the fund goes to the government, good bye,” Mr Dickinson told delegates at the SMSF Summit in Adelaide last week.

“We don’t want to make these people non-complying and we don’t want to disqualify them. But we cannot allow a significant number – about 40,000 funds with over $600,000 – of the population to continue to think they are operating as a fund,” he said.

“Non-reporting by SMSFs is a significant issue. It’s been a bad thing. With the advent of the retirement phase reporting in relation to the transfer balance cap… it’s become a bad thing times 10,” he said.

Professionals with clients who are struggling to meet those reporting obligations should engage with the ATO early. Though the ATO may not always be able to assist, Mr Dickinson said voluntary and early engagement boosts a client’s best chance at a favourable outcome.

The ATO has a voluntary disclosure service for clients, which you can access here. This service was launched in May 2016, after being first announced by sister publication SMSF Adviser in November 2015.

Clients who are not suited to managing their own superannuation should also be removed from the system before ATO intervention, Mr Dickinson said.

“You are the circuit breaker. We see it, but we often see it too late. Like a year [or] a year and a half later,” he said.

“It’s you that can help an SMSF trustee with that great piece of knowledge they’ve learnt at the pub, we don’t see it, they don’t tell us,” he said.

By: Katarina Taurian
25 OCTOBER 2017
accountantsdaily.com.au

Capital Gains and Renounceable Rights

In a small win, the taxation of renounceable rights offers (in some cases) will be concessionally treated following a recent Australian Taxation Office ruling.

The taxation of rights and premiums paid to retail shareholders has improved where those shares are held on capital account.

If the shareholder is an Australian resident then there is no assessable income on the timing of the grant of the entitlement and any retail premium received, can be treated us the realisation of a CGT asset. Most years a large public company structure an equity deal to provide this opportunity to its shareholders – in 2016 it included Origin, in 2017 it included Boral, JB Hi-Fi, and Vows Communications.

The right to be issued shares is a CGT asset, which if no action is taken and the resultant is sale by the company and subsequent premium is paid to the shareholder, capital gain will result. What is more significant is that the shareholder is considered to have required the rights when it acquired the original shares. There is a discount capital gain (i.e. 50%) if the shares were held for twelve months or longer.

AcctWeb

Paperwork bungles lead to $38k in payments

An example of the need to keep good records for everything you do. Good bookkeeping = good records.

Back office and paperwork bungles have seen several workers given $38,000 in unpaid wages and entitlements, as the regulator sounds alarm bells on its monitoring of “the intricacies of our workplace laws.”
The workers were based in the Newcastle and Hunter region of NSW, and were victims of poor compliance practices and checks of their employers.

In one matter, a young labourer in Lake Macquarie was back-paid $25,220 after he was underpaid as a result of being incorrectly classified as an apprentice.

Essentially, it was agreed the labourer would commence an apprenticeship, but the employer failed to properly complete the paperwork and registration process required to enter into a formal training arrangement.

Consequently, the labourer was paid lower rates than he was entitled to, and the employer had not taken the appropriate steps to ensure compliance.

“Employers must be aware that we are prepared to take enforcement action in response to reckless, deliberate or repeated breaches of pay and record keeping laws,” said Fair Work Ombudsman Natalie James.

“We conduct follow-up audits of businesses previously found to be non-compliant to make sure they have changed their ways. Repeat offenders can expect to be subject to serious enforcement action including potential litigation.

“In our experience many businesses are overconfident when it comes to the intricacies of our workplace laws, however we will be taking an increasingly hard line with employers who have significant compliance issues and cannot demonstrate that they made a diligent effort to understand what award or industrial instrument applies to their workplace, what the correct classification for their employees is, and what minimum pay rates apply.”

By: Staff Reporter
04 OCTOBER 2017
accountantsdaily.com.au

Former director liable for company’s unpaid tax liabilities

A reminder that directors can very easily become responsible for unpaid taxation liabilities.

In the New South Wales District Court, a former non-executive director was held liable in full for unpaid PAYG withholding liabilities.

A director must take all reasonable steps to ensure that the company taxation obligations have been satisfied. Whilst in this case the director had relied upon assurances from the company officers that the debts would be paid and that arrangements were being entered into, ultimately the company did not pay any instalments. The director assisted in negotiations after he received a Director Penalty Notice from the Australian Taxation Office, but then resigned as a director. Still, the company did not pay.

The ATO chose to recover (successfully) against one of the two directors.

Whilst there might be many justifications for non-payment, and advisers and lawyers will argue on your behalf, ultimately the ATO will win almost every time they issue a Director Penalty Notice.

AcctWeb