Tax Smart Blog

One of the most important duties of the trustees of a superannuation fund is to manage the fund’s assets.  To reduce risk and ensure that funds are being maintained for genuine retirement, trustees have a number of duties and responsibilities.  These are summarised as follows:

Investment Objectives and Strategy

As part of managing the fund’s assets, a trustee of a superannuation fund, including a self managed super fund, is required to set an investment objective and strategy for the fund. These should be in writing and kept with the fund’s records.

Investment Objectives

An investment objective is a statement that identifies a fund’s investment goals.  The objective should be measurable and able to be communicated to fund members.  Examples of an investment objective could include the desire to:

1. Generate a specific rate of return;
2. Outperform a recognised investment (or cost of living) index over a specified period of time; and
3. Provide long term capital growth with some tax effective income by investing in certain asset classes.

Comply With Investment Restrictions

Although the superannuation rules require trustees to implement an investment strategy for the fund, they do not state exactly what investments a fund can acquire.  However, the legislation does impose certain restrictions on fund investments in order to protect member benefits.

Arm’s Length Rules

All investments by a SMSF must be made and maintained on a strict commercial (i.e. arm’s length) basis.  In other words, the relevant purchase/sale price of any fund asset should be based on a fair market value regardless of who the parties to the transaction are.  Similarly, any rental or lease amounts paid for the use of any fund asset should reflect a fair market rate of return.

Loans to Members and Relatives

The trustees of a SMSF are prohibited from lending money (or providing any form of financial assistance) to a member of the fund or their relatives.

Borrowing

SMSFs are prohibited from borrowing money with some limited exceptions.  These include short term borrowings:

1. For up to 90 days to pay a benefit or surcharge liability; and
2. For a maximum of 7 days to cover the settlement of certain security transactions.

In both these situations the amount of the borrowing must not exceed 10% of the fund’s total assets.

Although a super fund cannot borrow, it is worth noting that they are not prevented from investing in assets that do incorporate borrowings, such as geared managed investment funds or installment warrants.

Acquisition of Assets from Related Parties Rule

The trustees of a Super Fund, including a self managed super fund, are prohibited from intentionally acquiring assets from a ‘related party’ of the fund.  This not only refers to funds purchasing assets from related parties but also includes such parties contributing assets “in kind” (e.g. in-specie contributions).

However, there are some important limited exceptions to the above rule for acquiring related party assets, including:

1. Listed securities (i.e. Shares, units or bonds listed on an approved stock exchange);
2. Business real property (i.e. Freehold or leasehold property interests used exclusively in one or more businesses) acquired at market value;
3. An in-house asset where the acquisition would not result in the level of the fund’s in-house assets exceeding 5%; and
4. Units in a widely held unit trust, such as a retail managed fund.

The definition of related party is very broad and includes:

1. All members of the fund and their associates, and
2. All standard employer sponsors of the fund and their associates

An associate includes a member’s relatives, business partners (and their spouse and children), or any companies or trusts a member controls or that control the employer sponsor.

A standard employer sponsor is an employer who contributes to the fund on behalf of members as part of an agreement between the employer and the trustees of the fund.  Standard employer sponsors are usually employers who make employee contributions to their own corporate fund or to a relevant industry fund.

Breaching the acquisition of assets from related party rules is considered a serious breach and can incur severe penalties.  It is therefore important for a trustee to ensure that any investment the fund makes will not breach these rules.  If there is any doubt a trustee should seek clarification from their professional service provider or seek guidance from the ATO.

The in-house asset rules limit a superannuation fund from undertaking certain transactions with related parties in order to limit risk and to ensure that funds are being maintained for genuine retirement purposes.  In-house assets are defined as:

1. An investment of a fund in a related or trust (i.e. a fund owns shares in a company or units in a trust);
2. An asset of a fund that is leased to a related party; and
3. A loan made by a fund to a related company or trust.

An investment, lease or loan that is an in-house asset is not prohibited but is limited to 5% of the market value of a fund’s assets.  That is, if a fund leased an asset to a related party, the value of that asset (combined with any other in-house assets) must not exceed 5% of the total value of the fund’s assets.

In recognition of certain legitimate business arrangements the superannuation rules exempt certain assets, such as business real property, from being an in-house asset.  This allows a fund to lease certain assets to related parties, or to invest in certain related entities without being limited to 5%.

In certain situations, assets that would otherwise be an in-house asset are exempt from these rules under transitional provisions announced on 11 August 1999.

Pay Benefits In Accordance With Preservation Rules

To ensure that superannuation savings are used for retirement and other permitted purposes, special rules apply to limit when members can access their superannuation.  These are called preservation rules.  Trustees of superannuation funds are responsible for ensuring that their fund complies with these rules at all times.

Superannuation benefits consist of one or more of the following preservation components:

1. A preserved benefit;
2. A restricted non-preserved benefit; and
3. An unrestricted non-preserved benefit.

Preserved Benefits

Preserved benefits can only be paid out as a lump sum or pension where a member has satisfied one of the following conditions of release:

1. Permanent retirement from the workforce on the member reaching their preservation age.  Preservation age is determined according to date of birth as shown in the following table:

Date of birth	Preservation age
Before 1 July 1960	55
From 1 July 1960 to 30 June 1961	56
From 1 July 1961 to 30 June 1962	57
From 1 July 1962 to 30 June 1963	58
From 1 July 1963 to 30 June 1964	59
On 1 July 1964 or after	60

1. Termination of employment after turning 60 years of age;
2. Permanent incapacity;
3. Reaching age 65;
4. Death;
5. Compassionate grounds (situations approved by the ATO); or
6. Financial hardship

If a person has reached preservation age but not yet permanently retired, they can access their super in the form of a transaction to retirement pension (but they cannot make lump sum withdrawals).

Restricted Non-Preserved Benefits

Restricted non-preserved benefits must remain in a superannuation fund until a member:

1. Satisfies a condition of release for preserved benefits; or
2. Has terminated employment with an employer who contributed to fund on their behalf.

Unrestricted Non-Preserved Benefit

Unrestricted non-preserved benefits can be cashed at any time.

Breaching the preservation rules is considered a serious offence and can result in severe penalties for both the trustees of a fund and the member improperly obtaining access to their benefits.  Trustees should ensure they comply with the preservation rules at all times.

Once a member has satisfied a condition of release they can access their benefit, depending on the fund’s rules, as either a lump sum or pension, or as a combination of both.

Pension That A SMSF Can Pay From 1 July 2007

Under the reforms a SMSF can now only pay two types of pensions.  These are:

1. Account-based pensions
2. The transition to retirement income stream

Prior to the reforms SMSFs were able to commence to pay other types of pensions including:

1. Market linked pensions
2. Allocated pensions
3. Lifetime complying pensions

In cases where a SMSF had already started paying one of these pensions, the SMSF is allowed to continue paying it.

As Allocated Pensions were formerly the pension of choice, it is important to understand how these differ from Account Based Pensions:

1. Account-based pensions have no maximum limits, whereas allocated pensions do;
2. Account-based pensions usually have lower minimums than allocated pensions; and
3. Account-based pension payment factors are simpler and easily understood.

On 28th September 2011 the High Court of Australia confirmed the Superannuation Guarantee Charge Act (SGCA) and the Superannuation Guarantee Administration Act (SCAA) are valid under Australia’s Constitution in the case Roy Morgan Research Pty Ltd v Commissioner of Taxation.

Minister for Superannuation, Bill Shorten, said he was pleased with the outcome of the case.

“The Superannuation guarantee chare (SGC) was introduced to encourage employers to pay their employees’ superannuation on time,” Mr Shorten said.

“It also makes sure employees are compensated appropriately if their employer is late paying their superannuation.”

“The SGC plays an important role in the integrity of our superannuation system and I am pleased to see it will be maintained under this High Court decision.”

Employers who fail to pay their employees’ superannuation on time are required  to pay the superannuation guarantee charge (SGC) to the Australian Taxation Office (ATO), which then transfers the SG amount plus an interest component to the employee’s superannuation fund.

The High Court found the SGC was constitutionally valid following a challenge by Roy Morgan Research Pty Ltd.

Recently the ATO issued a fact sheet on the superannuation guarantee to acknowledge the twentieth birthday of superannuation guarantee.

This is a significant anniversary for the nation, and worthy of reflection. In the history of superannuation in Australia, the introduction of superannuation guarantee represents the underpinnings of a national framework for funding retirement income. It is something close to the ATO's heart, as the ATO's genesis as the Land Tax Office in 1910 was to collect tax which would provide for old age and invalid pensions.

Governments in many countries, including Australia are faced with the financial and social challenges of an ageing population.  Superannuation Guarantee has enabled Australia to develop a strong and substantial superannuation system to help address these future challenges.

The policy of superannuation for all Australians was a long time in gestation, but is now part of the essential character of our tax and super systems. Superannuation connects to and depends on our tax system for its foundations and strength. Among the concessions, benefits and incentives provided by the Commonwealth through the tax system, superannuation is the second largest expense.

Superannuation is now entering a new phase and on the birthday of super guarantee, it is useful and encouraging to reflect on what has been achieved to date.

From the mid-nineteenth century, occupational superannuation existed in Australia amongst white collar employees, but it was not until the 1970s that private superannuation became more widely available through its inclusion in industrial awards.

For much of its history, Superannuation covered only a minority of Australians. By 1983 it still only covered about 40% of the nation's workforce. Attempts in 1928, 1938 and 1976 to introduce a universal superannuation system all failed.

In 1985, amid an uneasy economic climate, the Government and the Australian Council of Trade Unions agreed to introduce productivity award superannuation, which allowed for part of the award system's wage increase to be a 3% superannuation contribution. By the late 1980s superannuation had extended to about two-thirds of the private sector. However, the low rate of contribution was not sufficient to substantially improve retirement incomes for the average paid worker.

In 1991, the Industrial Relations Commission's rejection of a further 3% increase to award superannuation led the Senate Select Committee on Superannuation in June that year, to inquire into 17 issues including taxation of superannuation, vesting of benefits, prudential controls, superannuation simplification, adequacy of public education and the rules governing employer contributions.2

On 20th August, 2011 the Government announced the introduction of SG in its Budget, stating that SG would provide:

1. A major extension of superannuation coverage to employees not currently covered by superannuation
2. An efficient method of encouraging employers to comply with their obligation to make contributions on behalf of their employees
3. An orderly mechanism by which the level of employer superannuation support could be increased over time, consistent with the government's retirement income policy objectives and the economy's capacity to pay.

The Superannuation Guarantee Charge Act 1992 and Superannuation Guarantee (Administration) Act 1992 (SGAA) came into effect from 1 July 1992, mandating a minimum level of employer contributions, with a charge imposed for failures to meet that minimum, which is then distributed to employees' super funds. Administration of the super guarantee acts was entrusted to the ATO.

In the first year after the introduction of SG, 80% of employees were covered. By 1999 this had increased to the present coverage of 91% of employees, a significant shift in just 16 years since the 40% coverage of 1983. The compulsory minimum level of employer contributions began at 3% and had risen to the current 9% by 2002. Other changes continued to refine the super guarantee system. Highlights include:

1. July 2005:  Establishment of the Superannuation Holding Accounts to accept small SG contributions.  From July 2006 the holding account has been limited to holding payments of shortfall SG amounts where a super fund for an employee cannot be found.
2. July 2007:  The maximum age for SG contributions was increased from 65 to 70 in recognition that more Australians were choosing to work past retirement age.
3. Since 2002:  Australia has entered into bilateral agreements with other countries to address double superannuation coverage.  The ATO currently has agreements in place with 16 countries.
4. July 2003:  SG contributions moved from compulsory annual contributions to quarterly contributions, allowing earlier investment and protecting employee benefits in situations of employer insolvencies.
5. July 2005:  Choice of fund was introduced, allowing the majority of employees to nominate their own supper fund.
6. Jan 2006:  The introduction of the late payment offset allowed employers to offset late contributions against an SG charge liability in certain circumstances.
7. July 2008:  Ordinary time earnings became the standard earnings base for all calculations of SG contributions.
8. July 2009:  The former Workplace Relations Act 1996 was replaced by the Fairer Work Act 2009.  Some superannuation aspects of the new legislation commenced from January 2010.
9. July 2010:  Introduction of the Small Business Clearing House administered by Medicare to assist small business employers meet their SG obligations.

As of March 2011 superannuation assets in Australia totalled $1.23 trillion, an increase from $230 billion in September 1995. This growth is predicted to continue to over $6 trillion by 2035. Of the $107 billion in total contributions made to super funds in the 2009-2010 financial year, $72 billion were employer contributions. In the same year over $60 billion in superannuation benefits were paid out from super funds as either pensions or lump sum amounts.

The corollary of mandated contributions is confidence in the superannuation system. The ATO helps to maintain high levels of trust and confidence in our super system through education of employers, and well targeted compliance assurance activity.  The ATO investigates unpaid superannuation on behalf of employees (around 18,000 a year) who contact them when they believe their employers may not be meeting their SG obligations. The ATO focuses on employers and industries at high risk of not meeting their superannuation obligations, and since July1992, the ATO has raised over $4 billion in superannuation guarantee charge liabilities from employers not meeting their SG obligations.  Approximately $2.5 billion has been collected and distributed to employee super accounts.

Further enhancements to the super system arise from key government reviews: the Australia's Future Tax System Review and the Super System Review, better known as the Cooper Review.

Following consideration of recommendations from both reviews, the Government, in its 2010 Budget announced significant changes to Australia's superannuation regime, primarily focused on the ability of each Australian to be able to accumulate adequate retirement savings.

A keystone of these changes is the proposed increase to the superannuation guarantee contribution rate from 9% to 12% by 1 July 2019. Raising the age limit from 70 to 75 years is another significant proposal that would take effect from 1 July 2013.

Further changes announced in this year's budget include:

1. The greater use of tax file numbers to locate and match lost member accounts
2. An extension of the director penalty regime to make directors personally liable for unpaid superannuation guarantee amounts, and
3. From 1 July 2012, employers must report on employee payslips the amount of superannuation actually paid into their super accounts.

Here the AAT held that the taxpayer was not carrying on an enterprise and therefore was not entitled to the input tax credits claimed of over $30,000.

In 2003 the taxpayer purchased a former fauna park near Cairns, intending to convert it into an educational and accommodation centre.  From 1 October, 2005 to 30 June, 2009, the taxpayer claimed GST input tax credits in excess of $30,000 and made reported taxable supplies of $6,029 i.e. $548 in GST payable.

In 2009 the Commissioner conducted an audit the taxpayer’s educational affairs, concluding the taxpayer was not entitled to the input tax credits claimed.  

Educational argued that its enterprise was one of an educational facility that specialises in immersion teaching.  The ATO’s argued that the taxpayer had ‘not undertaken business-like activities in a business-like manner.’

After consideration of the decisions in Russell and Spriggs, the AAT held in favour of the Commissioner.  The key was ‘if anything, this case is about preparation for commencement, not commencement itself’ – this despite the taxpayer having sought and obtained approval for a material change in use of ‘educational establishment’ in August 2004.  While the venture was well motivated, the AAT took the view it lacked commercial character.  The taxpayer’s negligible takings were from hiring out its venue.  Crucially no students were ever accepted and no courses offered.

There was no business plan and the Company did not make a single taxable supply as an educational academy.  Unsurprisingly, the AAT took the view the planned enterprise ‘never got going.’

Legislation was enacted on 29th June, 2011 that impacts the taxation of trusts.  The legislation introduces two new anti-avoidance rules and allows streaming of capital gains and franked distributions to beneficiaries for tax purposes.  The changes apply from the 2010-11 income tax year.

As a result of the practical difficulties associated with the law being enacted so close to the end of the income year, the ATO has put in place two administrative arrangements in respect of the application of the new law to the 2010-11 income tax year.

For the purposes of making a beneficiary specifically entitled to a franked distribution of a trust, we will extend the time for trustees to record a beneficiary’s entitlement to a franked distribution to 31st August, 2011 if the trustee has the same period in which to make beneficiaries presently entitled to trust income.

The ATO does not intend to select cases for review or audit for the sole purpose of determining whether the purported streamlining of capital gains or franked distributions by a trustee is tax effective.

Non-Concessional Contributions

Non-concessional contributions are contributions made by or for a member in a year that are not included in the assessable income of the super fund.  Generally, these are contributions that have not been claimed as a tax deduction by the person making the contribution i.e. they are contributions funded from after tax income or savings.

A non-concessional contribution cap of $150,000 will apply per person per year.  For members under the age of 65 they will be able to bring forward up to 2 years worth of contributions, to allow a contribution of up to $450,000 in any one year.  The non-concessional contribution cap will calculate as three times the ongoing concessional contribution cap (which is indexed).  Amounts in excess of the concessional cap are also included in the non-concessional contribution cap.  Contributions over and above the non-concessional contribution cap are taxed at 46.5%.

Concessional Contributions

Concessional contributions are contributions made by or for a member of a superannuation fund that are included in the assessable income of a superannuation fund.  These are generally employer contributions and those personal contributions for which a member will claim a tax deduction.

A concessional contribution cap of $25,000 per person per year now applies to concessional contributions from 1 July 2009.  This cap will be indexed.

A transitional period will also apply for members over age 50 between 2007/08 and 2011/12.  Where a member turns 50 during this period they will have a concessional contribution cap of $50,000 for each year from the time they turn 50 until the end of the transitional period.

Contributions in excess of the concessional contribution cap will be taxed at an additional 31.5% over and above any tax levied on the contribution.

Claiming a Tax Deduction for a Personal Contribution

Within the eligible caps, certain members may be able to claim a full tax deduction for any personal contributions they make to superannuation.  A member will be eligible to claim a tax deduction for a personal contribution where they:

1. Are not considered to be an employee for the purposes of the superannuation guarantee ; and
2. Are considered to be an employee for the purposes of the superannuation guarantee but derives less than 10% of their total assessable income and reportable fringe benefits from that employment.

CGT Cap Amount

Contributions made from certain amounts arising from the disposal of qualifying small business assets are exempt from a person’s non-concessional contribution cap, up to a life time limit of $1.1 million.

Contributions allowed under the cap include:

1. Up to $500,000 of capital gains that are disregarded under the small business CGT retirement exemption; and
2. The capital proceeds from the disposal of assets that qualify for the small business CGT 15-year exemption.

A self managed super fund (SMSF) is controlled and managed by the members of the fund.  As such, the members, as trustees, make all the decisions about how the fund is run, what investments it holds and the type of benefits it can pay.  The level of control and flexibility SMSFs allow are seen as some of their main advantages.

To be a SMSF, a fund must satisfy the following conditions:

1. It has less than five members;

1. If the trustee of the fund is a company (known as a corporate trustee), each director of the company is a member;

1. Each member of the fund is:

1. an individual trustee, or
2. a director of the corporate trustee

1. No member of the fund is an employee of another member, unless they are relatives; and

1. No trustee (or director of a corporate trustee) receives any remuneration for duties or services performed as trustee.

Where a SMSF only has one member, different rules apply.  In this case a one member fund will meet the definition of a SMSF if it satisfies the following conditions:

1. If the trustee of the fund is a body corporate:
2. The member is the sole director of the corporate trustee; or
3. The member is one of only 2 directors of the corporate trustee, and the member is not an employee of the other director (unless they are relatives)
4. If the trustees of the fund are individuals:
5. The member is one of only 2 trustees, and the member is not an employee of the other trustee (unless they are relatives)

In certain situations other people may be permitted to act as a fund trustee on a member’s behalf without causing the fund to fail the SMSF definition.  These situations include where a member has died or is legally disabled.

Who Can Be A Member Of A Self Managed Super Fund?

In general anyone can be a member of a superannuation fund.  However, to be a trustee of a SMSF, each member must be a trustee, aged over 18, and not be a disqualified person.  Where a member is legally disabled or aged less than 18years, another person (i.e. their legal personal representative or guardian) can be appointed to act as trustee on their behalf.

A person will be considered to be a disqualified person if they:

1. Have ever been convicted of an offence involving dishonest conduct;
2. Have ever been subject to a civil penalty for a breach of the sis act;
3. Are insolvent under administration; and
4. Have ever been disqualified from acting as a trustee of a superannuation fund.

Where a fund has a corporate trustee the company will be considered to be a disqualified person where:

1. A receiver, administrator or provisional liquidator has been appointed to the company;
2. The company has begun to be wound up; and
3. The company knows or has reasonable grounds to suspect that a responsible officer (director, secretary or executive officer) of the company is a disqualified person.

Where a trustee of a SMSF becomes a disqualified person, the trustee must immediately advise the ATO in writing.  Severe penalties can apply where a disqualified person knowingly continues to act as a trustee once they have become disqualified.

In certain circumstances it may be possible for a trustee to appeal to the ATO for a waiver of their disqualified status.

Trustee Responsibilities

As trustees, the members of a self managed superannuation fund are ultimately responsible for all aspects of the operation, administration and compliance of their fund.  Significant penalties can apply to trustees who fail to comply with their obligations.

Super Rules Trustee Must Follow:

1. Act honestly in all matters affecting the fund;
2. Exercise the same degree of care and diligence as an ordinary person in managing a fund;
3. Act in the best interests of all beneficiaries of the fund;
4. Keep fund assets separate from other assets (i.e. The trustees’ personal assets);
5. Retain control over the fund;
6. Develop and implement an investment strategy;
7. Not enter any contracts, or do anything else, that would prevent the trustee from properly performing or exercising their functions and powers; and
8. Allow members to access information about the fund and their benefit.

Trustees should be aware of these responsibilities and comply with them at all times.  Trustees appointed after 30 June 2007 will be required to sign a statement declaring that they understand their responsibilities.  Failure to act in accordance with these rules could result in penalties and loss of a fund’s tax concessions.

Sole Purpose Test

The sole purpose test applies to all funds and requires that a fund is established and maintained for the sole purpose of providing benefits to members upon their retirement, or to a member’s beneficiaries in the event of their death.

The sole purpose test is divided into both core and ancillary purposes and requires that a fund is maintained solely for:

1. One or more core purposes; or
2. At least one core purpose and one or more ancillary purpose from the following.

Core Purposes

A trustee of a superannuation fund is required to ensure that a fund is maintained for at least one of the following core purposes:

1. Paying benefits to members on or after their retirement;
2. Paying benefits to members when they have reached age 65; and
3. Paying benefits to member’s dependants or their legal personal representative upon their death.

Ancillary Purposes

Ancillary purposes include the provision of benefits in the event of:

1. Termination of a member’s employment (via resignation or redundancy) with an employer who had contributed to the fund;
2. A member’s temporary or permanent cessation of employment due to physical or mental incapacity;
3. A member’s death after their retirement; and
4. A member needing to access benefits on the grounds of financial hardship or on compassionate grounds.

Trustees must ensure that any decision made in relation to the acquisition, use of sale of assets relates solely to the process of retirement benefits (sole purpose test).  Any asset of a fund that is used to provide a current benefit to members or their associates would be a breach of the sole purpose test and could cause the fund to lose its compliance status.

Accept Member Contributions

The superannuation rules require the trustees of a superannuation fund, including a self managed super fund, to only accept contributions to the fund where the member is eligible to make a contribution.  These rules depend on a member’s age and working status and are summarised below.

Age of Fund Member and What Contributions Can Be Accepted

Under age 65

-        All personal contributions;

1. Eligible spouse contributions where the member and their spouse live together on a genuine domestic basis; and
2. All employer contributions

Age 65 to 74

1. All personal contributions and voluntary employer contributions once the member has been gainfully employed for at least 40 hours in a period of no more than 30 consecutive days in the financial year;
2. Eligible spouse contributions up until age 70 once the receiving spouse has been gainfully employed for at least 40 hours in a period of no more than 30 consecutive days in the financial year; and
3. All employer contributions.  Note that superannuation guarantee contributions can    only be accepted up to age 70.

Age 75+

1. Mandated employer contributions which are contributions an employer is required to make by law, such as contributions required under an industrial award.

On 28th July, 2011 the Government released a discussion paper to inform public debate on priorities and directions for continuing tax reform in the lead-up to the Tax Forum on 4th – 5th October.

The Government claims to have put in place a series of major reforms to build a stronger, fairer and simpler tax system and the upcoming Tax Forum will help the ATO build on that strong record of tax forum.

The Tax Forum aims to help identify further reforms to make the most of the opportunities and challenges ahead for Australia, such as the shift in global economic weight from West to East, the ageing of the population and the transition to a clean-energy future.

The Tax Forum will help identify further reforms which build on the Government’s priorities of:

1. Making the economy stronger by boosting participation and productivity and providing better incentives to work, save and invest;
2. Making the tax system fairer by ensuring concessions are appropriately targeted and tax rules achieve their original policy intent; and
3. Making the tax system simpler by removing unnecessary complexity.

The discussion paper outlines a range of ideas that were raised in the Australia’s Future Tax System Review that are likely to be discussed at the Tax Forum.

The discussion paper outlines a section on each of the six sessions that will be held at the forum, personal tax, transfer payments, business tax, state taxes, environmental and social taxes and tax system governance.

It also emphasises the Government’s commitment to fiscal discipline and the need for proposals that cut tax to also identify how they will be funded.

The Government has also released an initial invitation list for the forum which sets out participants and observers who have been selected, also explaining how others will be chosen.

The discussion paper, initial invitation list and online expression of interest form are available at the Tax Forum website at http://www.futuretax.gov.au.

The website also provides participants and other Australians with the chance to have their say on options for further reform, by uploading submissions and comments.

The Government has made reforming the tax and transfer system a priority since coming to office:

1. In the 2008 Budget, the government delivered the first of three rounds of personal income tax cuts and commissioned the Australia’s Future Tax System Review (tax review).
2. The 2009 Budget included the Secure and Sustainable Pension Reforms, which delivered an historic increase in the rate of the pension, strengthened indexation so the pension keeps up with the cost of living, introduced a new Work Bonus and announced a gradual increase in the age pension age.
3. In May 2010 the budget included the Stronger, Fairer, Simpler package of reforms to get a fairer return on the non-renewable resources and support growth across the entire economy, including by cutting the company tax rate, providing tax breaks for all small businesses, boosting superannuation and making it fairer and investing in regional infrastructure.
4. In the 12 months that followed, the Government announced a further 12 measures that deliver on reform directions identified by the tax review, including important reforms in this year’s Budget to boost workforce participation.
5. Most recently, the Clean Energy Future package included major reforms which triple the tax-free threshold and take around one million extra Australians out of the tax system.

Has this been effective tax reform?

Well the Tax Forum is an important opportunity to get a broad cross-section of views on priorities and directions for further reforming the tax and transfer system.

Have you considered the following...

• Do you have a valid Will that is regularly reviewed?
• Have you considered a Power of Attorney where a person grants another person the power to make certain decisions on their behalf such as to buy or sell properties?
• Consideration should be given to an Enduring Power of Attorney that lets someone act on your behalf if you lose the ability to make decisions for yourself. If you don't have one in place, in the unfortunate event of not having the “capacity” to maintain your affairs, control of your assets may pass to a government body such as The Office of the Protective Commissioner.
• Binding nominations are effective choices as to which beneficiaries receive your superannuation entitlements and in what proportions. Note if these nominations are not kept up-to-date, you could find your super money is distributed in the way you had not preferred.

You should have a financial plan that considers tax effectiveness.

The rules that apply to different assets, such as the tax treatment of a family home compared to shares or investment property must be considered

The Association of Accounting Technicians (AAT) issued a media release on 28th January, 2011 highlighting the need for business owners to ensure the bookkeeper they engage is ethical and appropriate.

Business owners are urged to require the bookkeeper they engage to do their account keeping to be registered as a BAS agent under the Tax Agent Services Regime.

An additional qualification is that the bookkeeper is also a member of a professional account keeping association such as the AAT. The AAT was established in Australia in 2002 and is supported by the major accounting bodies which include the Institute.