http://www.cleardocs.com/clearlaw/tax/index.html ClearLaw articles ATO-Crackdown-on-Family-Trust-Election-Compliance-Family-Trust-Election-Series-Part1 <p>The ATO’s recent focus on compliance with the family trust election (<strong>FTE</strong>) rules has generated significant controversy and alarm. The crackdown has resulted in the ATO undertaking extensive audits of family trusts and historical distributions, and the issue of hefty Family Trust Distributions Tax (<strong>FTD Tax</strong>) assessments for noncompliance – being a 47% tax (plus Medicare levy) along with General Interest Charges (<strong>GIC</strong>) on any historical liabilities. The ATO’s approach has been criticised on the basis that its application has been harsh and inconsistent with underlying legislative intent, and that the rules are too complex, rigid and outdated.</p> <p>It is a timely reminder for trustees and advisers to review existing FTE arrangements, and a message of caution to those who wish to implement them. Despite the recent alarm, the FTE provisions still provide numerous benefits to family groups if applied properly, including that such arrangements make it easier for trustees to pass franking credits through to beneficiaries, utilise carry forward trust losses and assist with accessing small business restructure CGT rollovers.</p> <p>This article will outline what an FTE is and provide context on the recent critique of the ATO’s crackdown on family trusts. It will also provide some suggestions on what trustees and advisors should be doing in light of the ATO’s focus on FTEs, and will also outline some of the benefits and risks of making an FTE. This article will be followed next month by Part 2 in this series on FTE’s, covering recent examples and case studies of the ATO’s change in approach including cases currently on foot with high-net worth family trust arrangements.</p> Fri, 28 Nov 2025 04:27:33 GMT Tristram Feder, Maddocks Lawyers 1135 Trick-or-Tax-ATO-guidance-for-new-SMSFs-31-October-deadline-requirements <p><em>The Australian Taxation Office (<strong>ATO</strong>) has issued updated guidance for trustees who have recently established a self-managed super fund (<strong>SMSF</strong>), highlighting key actions that must be completed by 31 October. This guidance serves as a timely reminder of the legal and compliance obligations that SMSF trustees must meet in their first year, including statutory duties under superannuation law and administrative responsibilities to ensure the fund remains compliant.</em></p> <p><em>Trustees must also understand their legal obligations and complete all required tasks to avoid penalties or delays. The ATO’s guidance aims to support new trustees in navigating these early-stage requirements effectively.</em></p> <p><em>This article provides an overview of some of the key trustee responsibilities including understanding statutory obligations, preparing accurate and timely financial statements, ensuring fund assets are properly valued in accordance with ATO standards, and appointing an approved SMSF auditor to review the fund’s financials and compliance status.</em></p> Fri, 29 Aug 2025 01:27:29 GMT Nick Brewin, Maddocks Lawyers 1003 Surfing-the-ITAA-Federal-Court-upholds-ATOs-position-on-dividend-stripping <p>On 22 April 2025, the Federal Court handed down its decision in Merchant v Commissioner of Taxation<a href="#_ftn1" name="_ftnref1">[1]</a>. The case involved Mr. Merchant and GSM Pty Ltd challenging an ATO decision, with the Court examining whether their arrangements breached anti-avoidance rules under Part IVA<a href="#_ftn2" name="_ftnref2">[2]</a>, particularly in relation to dividend stripping.</p> <p>This article outlines the key issues, the Court's findings, and what the decision means for future ATO scrutiny of similar tax arrangements.</p> Mon, 30 Jun 2025 00:22:55 GMT Jack Curran, Maddocks Lawyers 904 Federal-Government-Budget-2025-26-what-it-means-for-you <p><em>On Tuesday 25 March 2025, Treasurer Jim Chalmers handed down the 2025–26 Australian Federal Government Budget.  This year’s budget will be in a deficit of approximately $42.1 billion and will be the Labour Government’s final budget before the coming election, with the focus of this budget-deficit to be on relieving cost of living pressures for individuals.</em></p> <p><em>The Treasurer addressed five areas of priority in the budget, being: supporting the recovery from ex-Tropical Cyclone Alfred, cost-of-living support, strengthening Medicare, investing in education, and making the economy "more competitive, dynamic and productive”.</em></p> <p><em>This article provides an overview of the Federal Budget and its measures while highlighting three key limbs of the budget, being: (1) the focus on cost of living and the changes to tax measures across a broad range of settings (2) the broader tax breaks and support that businesses will receive and (3) the measures aimed at encouraging investment in Australian business.</em></p> Thu, 29 May 2025 05:51:57 GMT Jack Leeds, Maddocks Lawyers 871 ATO-watch-on-Division-7A-circumvention-review-on-the-use-of-guarantees-for-third-party-loans <p><em>Late last year, the ATO released a taxpayer (<strong>Alert</strong>)<a href="#_ftn1" name="_ftnref1"><strong>[1]</strong></a> that they are reviewing certain arrangements which are intended to circumvent Division 7A of the Tax Act.<a href="#_ftn2" name="_ftnref2"><strong>[2]</strong></a> The Alert outlined the ATO’s concerns regarding arrangements under which private companies guarantee third party loans, thereby allowing for the circumvention of Division 7A of the Act (which operates to prevent companies from making tax-free distributions of profits to shareholders or to their associates).</em></p> <p><em>Whilst the types of structures identified by the ATO in the Alert may be seen as an effective method for ensuring that Division 7A is not triggered, the Alert serves as a warning that circumventing Division 7A through these types of arrangements may no longer be permissible in the near future. The Alert is particularly relevant to accountants, advisers and lawyers, who advise and assist clients with such financial arrangements. </em></p> <p><em>This article outlines the ATO’s key points of focus, outlines the types of structures which are currently being utilised and the issues to be aware of in creating arrangements that will comply with Division 7A of the Act. </em></p> Fri, 04 Apr 2025 05:32:51 GMT Cooper Smith, Maddocks Lawyers 837 streamlining-governance-through-the-ATOs-deductible-gift-recipient-reforms <p>The end of financial year is a timely reminder to take stock of the recent developments in Australian charities law as individuals seek to capitalise on tax deductions for charitable donations.</p> <p>On 1 January 2024, the Australian Government introduced reforms to consolidate the administration and oversight of organisations with deductible gift recipient (DGR) status in Australia through amendments to tax legislation <a href="#Ref1">[1]</a>. Receiving DGR endorsement is crucial for charities in Australia because organisations that are endorsed as DGRs are entitled to receive donations that are deductible from the donor's income tax.</p> <p>The reforms specifically target the governance of organisations seeking DGR endorsement as cultural organisations, environmental organisations, harm prevention charities and developing country relief funds or organisations. They also emphasise the importance of effectively planning an organisation's charitable purposes and intended activities from the onset, and ensuring that clear legal drafting captures these legal purposes.</p> <p>This article outlines the key legislative changes and emphasises the critical role of legal advice for organisations aiming to register as charities and secure DGR endorsement.</p> Wed, 10 Jul 2024 05:52:32 GMT Matthew D'Angelo, Maddocks Lawyers 695 Making-Cents-of-Division-7A-Loan-Agreements <p>Division 7A  is designed to ensure that shareholders pay income tax on the distributions they receive from their companies. Division 7A operates by deeming certain amounts which are paid, lent or forgiven by a company to a shareholder or an associate of a shareholder, as a dividend, on which income tax must be paid, unless certain exemptions are met.</p> <p>Despite Division 7A playing a pivotal role in our tax landscape, the mechanics behind the anti-avoidance provision, and its impact on shareholder loans, distributions and related party transactions are often misunderstood. Compliance with Division 7A often requires the implementation of structural measures such as loan agreements to address any potential compliance issues and adverse tax implications.</p> <p>This article provides an overview of Division 7A and explores how shareholders, and businesses more broadly, can utilise Division 7A compliant loan agreements (Division 7A Loan Agreements) to maximise tax efficiencies. It will also consider the key terms of the Cleardocs Division 7A Loan Agreement, when it can be used and how to adhere to the legislative requirements.</p> Tue, 07 May 2024 01:29:22 GMT Sophie Edgar 688 ATO-expands-characterisation-of-software-payments <p>The Australian Tax Office (<b>ATO</b>) has recently updated its draft Taxation Ruling TR 2024/D1, which deals with the characterisation of payments in respect of software and intellectual property rights.</P> <p>The updated draft ruling broadens the circumstances in which the ATO considers payments relating to software and other intangible property rights to be 'royalties', thereby expanding the number of payments under software arrangements that may be subject to royalty withholding tax in Australia. </p> <p>This article provides an overview of the new draft ruling and summarises the types of payments the ATO will consider to be a royalty, as well as the broader implications of the ruling for businesses dealing with software and other intellectual property rights.</p> Tue, 02 Apr 2024 02:37:44 GMT Stephen Dyason 685 Grand-Final-escapee-engaged-in-very-serious-dishonest-conduct <p>A recent decision of the Administrative Appeals Tribunal (<strong>AAT</strong>)<a href="#ref1">[1]</a> sounds a warning for financial advisors about ASIC's ability and willingness to impose lengthy banning orders for seemingly private conduct. This article summarise the regulatory framework used to assess conduct involving fraud and dishonesty, and considers how private conduct can be taken into account in banning determinations for financial advisers.</p> Tue, 28 Nov 2023 04:57:10 GMT Michael D Wells, Maddocks Lawyers 676 Highway-to-the-low-risk-zone The ATO has recently updated its Practical Compliance Guideline PCG 2018/9, which deals with the ‘central management and control test’ of residency for foreign-incorporated companies. <br /> The update introduces a risk assessment framework to allow companies to self-assess the likelihood of the ATO applying compliance resources to review their residency status. <br /> This article provides an overview of the central management and control test, with a focus on the new risk assessment framework and how companies can ensure they fall within the 'low-risk zone'.<br /> <br /> Tue, 28 Nov 2023 04:54:15 GMT Matthew D'Angelo, Maddocks Lawyers 675