Recent developments

Welcome to the June technical roundup. Over the past month, the Australian Tax Office (ATO) has issued a practical compliance guideline that outlines the safe harbour approach and what factors are considered when extending the two-year period for the disposal of a dwelling acquired from a deceased estate.

Another item of note is the asset and income thresholds for the eligibility of the Age Pension will increase from 1 July. The income thresholds for aged care means testing will also increase with inflation.

Legislative developments

Regulator views

Other

 


 

Legislative developments

Acts

The following bill in this section has passed through Parliament earlier this month and is now awaiting royal assent:

Tax relief measures

  • Treasury Laws Amendment (Tax Relief So Working Australians Keep More Of Their Money) Bill 2019 implements the Government’s Lower Taxes Plan that was announced in the 2019 Federal Budget.
  • Schedule 1 of the bill makes the following changes to the low and middle income tax offset (LAMITO) from 2018/19 to 2021/22:
    • for individuals with an income below $37,000, the base offset will increase from $200 to $255
    • for individuals with income between $37,000 and $48,000 the phase-in rate will increase from 3 per cent to 7.5 per cent
    • for individuals with income between $48,000 and $90,000 the maximum offset will increase from $530 to $1,080
    • for individuals with income above $90,000 the phase-out rate will increase from 1.5 per cent to 3 per cent, this will increase the cut-out threshold from $125,333 to $126,000.
  • The bill also makes the following changes to the low income tax offset (LITO) for the 2022/23 and later income years:
    • increasing the base offset from $645 to $700,
    • increasing the first phase-out threshold from $37,000 to $37,500
    • decrease the first phase-out rate from 6.5 per cent to 5 per cent
    • increasing the second phase-out rate from $41,000 to $45,000, the second phase-out rate will remain at 1.5 per cent.
  • Schedule 2 of the bill makes the following changes to the income tax rates and thresholds as follows:
    • from 1 July 2022, increasing the top threshold for the 19 per cent tax rate from $41,000 to $45,000
    • from 1 July 2024, decreasing the tax rate between $45,000 and $200,000 from 32.5% to 30%.
  • Equivalent rate and threshold changes will apply for foreign residents and working holiday-makers.

Legislative Instruments

Maximum daily fees for home care recipients

  • Aged Care Legislation Amendment (Reducing Home Care Fees) Instrument 2019 makes the following amendment to the Aged Care (Subsidy, Fees and Payments) Determination 2014
    • adjust the basic daily care fee for home care recipients based on level of home care
      • for level 1 home care the daily care fee is $9.44
      • for level 2 home care the daily care fee is $9.99
      • for level 3 home care the daily care fee is $10.27
      • for level 4 home care the daily care fee is $10.54

Regulator views

Australian Taxation Office

Non-concessional MIT income

  • The ATO has issued a draft Law Companion Ruling (LCR) relating to withholding tax for managed investment trusts (MITs) for foreign individuals. LCR 2019/D2 outlines the key aspects of non-concessional MITs and addresses the increase of the MIT withholding rate for fund payments from 15% to 30% when they are attributable to non-concessional MIT income.
  • Submissions on this draft ruling are due by 9 August 2019.

Deceased estates dwelling disposal period

  • The ATO has also issued a Practical Compliance Guideline (PCG) relating to the disposal of dwellings acquired from a deceased estate. PCG 2019/5 outlines the factors that are considered by the ATO when deciding to extend the two-year period to disregard capital gains for disposal of a dwelling acquired from a deceased estate as well as the safe harbour compliance approach.
  • To qualify for the safe harbour, all of the following conditions must be satisfied:
    • During the first two years, more than 12 months were spent addressing circumstances such as:
      • Ownership of dwelling, or the will, being challenged
      • A life or other equitable interest in the will delays the disposal of the dwelling
      • The complexity of the estate delaying administration of the estate
      • Settlement of the contract for sale is delayed or falls through for reasons outside of the beneficiary’s or trustee’s control.
    • The dwelling was listed for sale as soon as practically possible after the circumstances above were resolved
    • The sale is settled within 12 months of the dwelling being listed for sale
    • Certain circumstances around the disposal are not material to the delay, such as:
      • property market prices
      • delays from refurbishing
      • inconvenience on the part of the trustee or beneficiary to organize the sale, or
      • unexplained periods of inactivity by the executor in the administration of the estate.
  • The ATO will also consider the following factors when considering exercising discretion to extend the two-year period:
    • the sensitivity of personal circumstances
    • the degree of difficulty in locating all beneficiaries to prove the will
    • any period the dwelling was used to produce assessable income, and
    • the length of time the ownership interest is held

Other

Social security indexation

  • Indexed thresholds for pensions, allowances and family assistance payments were released by the Department of Social Services.
  • From 1 July 2019, the income and assets test thresholds used to determine eligibility for the Age Pension will increase.

    To be eligible for the full Age Pension, a single homeowner must have income less than $174 a fortnight and assets of less than $263,250. A homeowner couple must have combined income of less than $308 per fortnight and assets of less than $394,500 to receive the full Age Pension.

  • The income test thresholds that apply for aged care means testing arrangements will also increase due to inflation.

Related products

Contact us

Monday to Friday 8am – 6pm (Sydney time)

1800 808 508

Talk to us today

To speak to a specialist complete this form and we'll be in touch.

Help and support

Visit our Adviser Help Centre and search our adviser FAQs.

Additional information

Macquarie Investment Management Limited (MIML) ABN 66 002 867 003 AFSL 237 492 is not an authorised deposit-taking institution for the purposes of the Banking Act (Cth) 1959, and MIML’s obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542 (MBL). MBL does not guarantee or otherwise provide assurance in respect of the obligations of MIML.

This information is provided for the use of financial services professionals only. In no circumstances is it to be used by a potential investor or client for the purposes of making a decision about a financial product or class of products.

The information provided is not personal advice. It does not take into account the investment objectives, financial situation or needs of any particular investor and should not be relied upon as advice. Any examples are illustrations only and any similarities to any readers’ circumstances are purely coincidental.

While the information provided here is given in good faith and is believed to be accurate and reliable as at the date of preparation, 23 May 2019, it is provided by MIML for information only. We will not be liable for any losses arising from reliance on this information.

This information is intended only to provide a summary and general overview on matters and does not constitute legal advice. You should seek legal or other professional advice before relying on this information.

MIML and MBL do not give, nor purport to give, any taxation advice. The application of taxation laws to each client depends on that client’s individual circumstances. Accordingly, clients should seek independent professional advice on taxation implications before making any decisions about a financial product or class of products.