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Targeted amendments to Division 7A

The Government is widening the scope of Division 7A to include unpaid present entitlements from 1 July 2019.

This will apply where a related private company is entitled to a share of trust income as a beneficiary but has not been paid that amount (unpaid present entitlement).

Division 7A is an integrity rule that requires benefits provided by private companies to taxpayers to be taxed as dividends unless they are structured as Division 7A complying loans or where another exception applies.

The Government aims to clarify the operation of the Division 7A integrity rule to ensure the unpaid present entitlement is either required to be repaid to the private company over time as a complying loan or subject to tax as a dividend.

Additionally, the targeted amendments announced in the 2016-17 Budget, aimed at improving the operation and administration of Division 7A, have now been delayed to commence from 1 July 2019. This will enable all the Division 7A amendments to be progressed as part of a consolidated package.

From 1 July 2019, the following measures will be introduced:
– A self-correction mechanism to assist taxpayers to rectify inadvertent breaches of Division 7A promptly.
– Appropriate safe harbour rules to provide certainty and simplify compliance for taxpayers.
– Simplified rules regarding complying Division 7A loans, including loan duration and the minimum interest rate.
– A number of technical amendments to improve the integrity and operation of Division 7A and provide increased certainty for taxpayers.

Posted on 30 May '18 by , under Tax.

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The transition to retirement (TTR) strategy allows you to access some of your super while you continue to work.

You are able to use the TTR strategy if you are aged 55 to 60. You can use it to supplement your income if you reduce your work hours or boost your super and save on tax while you keep working full time.

  • Starting a TTR pension: To start your TTR pension, transfer some of your super to an account-based pension. You have to keep some money in your super account so that you can continue to receive your employer's compulsory contributions as well as any voluntary contributions you may be making.
  • Government benefits and TTR: The benefits you or your partner receive might be impacted if you choose to opt for this strategy. How and what exactly will change might become clearer upon discussing this with a Financial Information Service (FIS) officer.
  • Life insurance and TTR: In some cases, the life insurance cover you have with your super may stop or reduce if you start a TTR pension – check this before making any decisions or changes.

TTR can help ease your mind as you transition into retirement but it can be a bit complex. Before you choose whether you want to use TTR to reduce work hours or save on tax, or even if you want to use TTR altogether, you should figure out how this will impact all aspects of your finances.

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