• Introduction

    What's new?

    Attention

    Warning:

    This information may not apply to the current year. Check the content carefully to ensure it is applicable to your circumstances.

    End of attention

    Foreign losses and Foreign income tax offset rules

    New rules relating to foreign income and losses apply for the 2008-09 and later income years. The new rules:

    • remove the quarantining of foreign tax credits and introduce new foreign income tax offset rules
    • remove the quarantining of foreign losses and
    • provide transitional rules for the treatment of pre-existing excess foreign tax credits and foreign losses.

    Foreign residents receiving distributions from Australian managed trusts

    New tax and withholding arrangements relating to Australian managed investment trust distributions to foreign residents apply for income years starting on or after 1 July 2008. For more information, see our fact sheet New withholding arrangements for managed fund distributions to foreign residents at www.ato.gov.au

    National rental affordability scheme

    The National rental affordability scheme (NRAS) is designed to encourage large-scale investment in affordable housing. The NRAS offers incentives to providers of new dwellings on the condition that they are rented to low and moderate income households at 20% below market rates. A refundable tax offset is available where the Housing Secretary from the Department of Families, Housing, Community Services and Indigenous Affairs has issued a certificate under the NRAS.

    No-TFN tax offset and interest on no-TFN tax offset

    This is the first year in which you can claim a no-TFN tax offset under Subdivision 295-J of the Income Tax Assessment Act 1997 (ITAA 1997). Superannuation funds are entitled to a refundable tax offset for amounts of tax payable by the fund in the 2007-08 income year where:

    • tax was payable by the fund on an amount of no-TFN-quoted contributions , and
    • the no-TFN-quoted contributions were made to the fund to provide superannuation benefits for an individual who provided for superannuation purposes their TFN to the fund for the first time in 2008-09.

    This is also the first year in which interest on the no-TFN tax offset can be claimed under Part IIG of the Taxation (Interest on Overpayments and Early Payments) Act 1983. Certain conditions must be satisfied for interest to be payable by the Commissioner of Taxation to a superannuation provider.

    Changes to deduction for death benefit increase

    The Same-Sex Relationship (Equal Treatment in Commonwealth Laws - Superannuation) Act 2008 extended the definition of 'spouse' and 'child' for the purposes of determining whether a deduction for death benefit increase is available under section 295-485 of the Income Tax Assessment Act 1997.

    Terminal medical condition

    A member benefit transferred to another fund during the terminal medical condition period is treated as a personal contribution rather than a rollover by the receiving fund for tax purposes. For more information, see Accessing your super if you have a terminal medical condition.

    Small business and general business tax break

    The Tax Laws Amendment (Small Business and General Business Tax Break) Act 2009 has introduced an investment tax break for Australian businesses. Broadly, the tax break provides an additional tax deduction of 50% for small business entities, 30% or 10% for all other business entities, of the cost of eligible new tangible assets that are to be used in a business and for which a deduction is available under the core provisions of Division 40 of the Income Tax Assessment Act 1997 (ITAA 1997). In order to claim the tax break, certain conditions must be satisfied, for example, the eligible asset must be acquired and first used, or installed ready for use, within a specified timeframe.

    Taxation of financial arrangements

    The Tax Laws Amendment (Taxation of Financial Arrangements) Act 2009 will change the way certain financial arrangements held by some superannuation funds are treated for income tax purposes. It introduces the new Division 230 into the ITAA 1997 and broadly sets out:

    • the method (accruals, realisation, fair value, retranslation, hedging, and financial reports) for calculating gains and losses on financial arrangements
    • the time at which the gains and losses will be brought to account for income tax purposes.

    This will not affect a fund's taxable income for 2009 or how a fund's 2009 tax return is completed. However, depending on the fund's circumstances, it may want to make certain elections. These may need to be made by the due date for lodgment of the 2009 tax return.

    Which funds are affected?

    Division 230 will apply to a superannuation fund where the value of the superannuation fund's assets is $100 million or more.

    All superannuation funds will be subject to Division 230 in respect of qualifying securities that they hold that end more than 12 months after they start to have them. This applies regardless of the fund's annual turnover and assets.

    A superannuation fund whose financial arrangements, other than qualifying securities, are not subject to Division 230 can elect to have Division 230 apply to those financial arrangements.

    Date of effect

    Division 230 applies to financial arrangements that a superannuation fund starts to have in income years starting on or after 1 July 2010. However, a superannuation fund can elect to apply it to financial arrangements it starts to have in income years starting on or after 1 July 2009.

    Existing financial arrangements election

    A superannuation fund can also elect to have Division 230 apply to financial arrangements that it started to have prior to the first income year in which Division 230 applies to it and that it holds at the start of that year.

    You must notify this election to bring-in existing financial arrangements to the Commissioner on or before the lodgment due date of:

    • the superannuation fund's 2009 tax return (if the first year to which Division 230 applies is the 2009-10 income year), or
    • the superannuation fund's 2010 tax return (if the first year to which Division 230 applies is the 2011 income year).

    There may be modifications to the above dates for taxpayers with substituted accounting periods and an 'early' balance date.

    Further information

    For more information, and to find out how to make these elections and how to notify the Commissioner, see Taxation of financial arrangements (TOFA).

    Funds paying minimum account based pensions - minimum annual pension payment requirements

    The Superannuation Industry (Supervision) Regulations 1994 (SISR) have been amended to halve the minimum payment amounts for account-based pensions for the 2008-09 income year.

    The regulations reduce the minimum payment amounts for account-based, allocated and market-linked (term allocated) pensions by 50%.

    In the 2009 Federal Budget the Government announced its plans to extend the reduction in minimum payment amounts to the 2009-10 income year. It is important to note that this is only an announcement and is subject to the SISR being amended to enact this announcement. For further information, see Super.

    Optional CGT loss rollover for complying super funds that merge

    On 23 December 2008, the Government announced that, with effect from 24 December 2008, it will provide an optional capital gains tax (CGT) rollover for capital losses arising from CGT events that happen under a complying superannuation fund's merger before 1 July 2010 with an APRA regulated superannuation fund with at least five members.

    On 29 April 2009, the Government announced that the period of application of the rollover will be extended to 30 June 2011. The Government also outlined an expansion of the rollover as follows:

    • The scope of the measure will be expanded to apply to mergers involving pooled superannuation trusts (PSTs) where the continuing entity has at least five members and to mergers involving the complying superannuation business of life insurance companies.
    • To reduce compliance costs, the measure will now permit superannuation entities in a net capital loss position to roll over assets with both capital gains and capital losses realised on transfer under the merger, rather than just capital losses. Entities can still transfer losses on an asset-by-asset basis as originally announced.
    • The rollover will permit previously realised net capital losses held in the transferring superannuation entity to be transferred to the continuing superannuation entity, and the rollover or transfer of any revenue losses to the continuing entity.
    Last modified: 25 Nov 2009QC 21714