Should I register for GST for a once-off development?

It is important in determining whether an entity is an entity making taxable supplies and has to register for GST purposes. Note the Commissioner takes the view in GSTR 2001/7 that a taxpayer who is not otherwise registered for GST but undertakes a one off property development will be required to register and pay GST on the proceeds of that transaction - where an entity engages in acquiring a single asset for resale at a profit the activity, for GST purposes, is considered an "enterprise" as an activity in the form of an adventure in the nature of trade. The issue of Mum and Dad owning a farm or a second property long term and then deciding to sub divide and whether this requires GST registration and accounting is one which is ripe for litigation.

source:
Peter Gell (28 October, 2006)
http://www.rockliffs.com.au/article.asp?ID=7148

Who can be trustee of an SMSF?

Humans are Trustees

If you want a human Trustee, all members of the SMSF must also be Trustees. You can't pick and choose between members - it's all or nothing.

A company is Trustee (a Corporate Trustee)

If you have a Corporate Trustee, all of the members must be the Directors of the Company and all of the Directors must be members of the Fund. The Corporate Trustee carries out its role as a Trustee of your superannuation fund just the same as you as individuals do.

If you are the only member of your SMSF, special rules apply.

What if I am the only member of my SMSF?

If you are the only member of your SMSF, you need a company as your Trustee. If not, then you need another unrelated person to act as your second Trustee. You can't be the only member and only Trustee.

The company acting as Trustee abides by special rules. You must:

·       Be the sole director of the Trustee Company; or
·       Be related to the other director of the Trustee Company (where there are only two directors of that Company); or

·       not be an employee of the other director of the Trustee Company (where there are only two directors of that Company).

Therefore, there are limited circumstances for a sole member with a Company as the Trustee to have a second director. This is the case even though that second director is not a member.

Source: law central

Interest deduction allowed on loan for units in a hybrid trust

The Full Federal Court has held that a taxpayer was entitled to a deduction for interest incurred on a loan taken out to acquire units in a hybrid trust.

It's an interesting case because the taxpayer's units entitled him to ordinary income of the trust, but capital gains could be distributed to other beneficiaries on a discretionary basis.

The technical details related to certain standard clauses in the deed (and in most hybrid trust deeds) granting the trustee the power to decide whether amounts received should be considered to be derived on income or capital account.

The Tax Office alleged that power made the deed a discretionary trust, meaning that the taxpayer would not be able to claim interest on the loan he took out to buy the units.

The Court rejected the ATO's assertions and allowed the taxpayer to claim the interest as the power in the deed merely allowed the trustee to allocate amounts between income and capital.

Source: AFA (www.activefa.com)

Implication of Bamford case on Trust capital gain

March 30 2010 is a landmark day for trusts in Australia. The High Court released its decision for Bamford v FCT [2010] HCA 10.

Why is Bamford so important anyway?

This is the first time the High Court has considered two of the most important concepts in trust law:
1. A 'share' (the Bamfords appealed this); and
2. The definition of 'net income' (the ATO appealed this).
These concepts are central to lodging trust tax returns and making trust distributions.

What did the High Court say?
The High Court upheld the Federal Court's decision Bamford v FCT [2009] FCAFC 66 in its entirety. The ATO lost their appeal about the definition of 'net income', and the Bamfords lost their appeal about how to calculate a 'share'.
Just for our beloved Platinum Members who have paid their $99 subscription, we decipher what you need to know after Bamford.

What does this mean for my Trust?
If you use a deed that is drafted with Bamford in mind, capital gains are taxed in the hands of the beneficiary. The Trustee is no longer taxed at penalty rates where there is no other income.
Bamford means that the beneficiary's liability is proportionate to either their fixed dollar or variable percentage of their interest in the income. If you don't have a Bamford complying deed, your beneficiaries may be taxed on income that is higher than what they actually receive.

source: law central