Aston Ryan Malcolm Blog
Do you lease personal property or supply goods on a retention of title basis?
Personal property security (PPS) reform brings the different Commonwealth, state and territory laws and registers regarding security interests in personal property under one national system and introduces the Personal Property Securities Act 2009 (Cth) and a single national online register.
What are personal property securities?
Personal property listed on the PPS Register includes assets that may be used to secure a loan, such as cars, boats, crops and intellectual property. The PPS Register does not include real estate property, such as houses, land or water rights.
Personal Property Securities Register
The PPS Register will allow lenders and businesses to register their security interests. Secured parties, buyers and other interested parties can search the PPS Register to find out if a security interest is registered over the personal property. The PPS Register commences operation in February 2012 as a web-based register that will be accessible to search and register security interests 24 hours a day, seven days a week.
What happens to existing security interest registers?
Security interests which are currently registered on a variety of registers will generally be migrated to the national PPS Register.
Buyers
Buyers need to make sure that the personal property they are buying does not have a security interest over it. For example, if you buy a car that still has an outstanding loan, the car could be repossessed by the person who loaned money against it. Buyers will be able to search the PPS Register to see if there are any security interests over personal property they want to buy.
A grantor is an individual or entity that grants a security interest over personal property to another party. Grantors include those who:
· use their personal property as security for a loan, (ie) a secured car loan
· use their business assets as security for a loan, (ie) a fixed or floating charge
· receive property under a retention of title arrangement
· lease personal property from another party for an extended period
Manufacturers and suppliers
Many manufacturers and suppliers sell their product on retention of title terms. Under the PPS rules, a retention of title arrangement is treated as if it were a security interest and the buyer of the goods is treated as if it were the owner, and the seller’s rights are those of a secured lender. This means that a manufacturer or supplier who sells on retention of title terms is at risk of losing its ownership interest in the goods if it does not comply with the procedures in the Act. This will require that the manufacturer or supplier register its retention of title arrangement as a security interest on the PPS register within the timeframes required by the Act.
If you would like further information about Personal Property Securities reform please contact Mark Wilson or Craig Smith on 9551 2822.
The Government announced in September 2011 that they will ban off market transfer of shares between self managed superannuation funds (SMSF) and related parties, commencing July 2012.
This procedure is commonly referred to as a transfer in specie.
It has been quite a common strategy that if a client owns shares individually, they are currently able to transfer the ownership of those shares to their Self Managed Superannuation Fund without actually having to sell those shares through a broker on the share market.
It has been a particularly useful strategy for a number of reasons:
· Allows for consolidation of shares under one entity
· Potentially allows for a tax deduction to be claimed for a contribution into a SMSF without actual cash being contributed
· Can be more tax effective to have shares owned by a SMSF than an individual because of the lower tax bracket of a SMSF –
either 0% tax for a SMSF in Pension mode or maximum of 15% for a SMSF in accumulation mode compared to 30% - 46% for an individual
Provided the investment strategy of the SMSF is structured to ratify ownership of the shares and that the value of the shares transferred reflects the true market value of the shares at the time of transfer, then all is in order.
When is an SMSF borrowing improvement allowed?
On 14 September 2011, the Australian Taxation Office (ATO) released Draft Self Managed Superannuation Funds Ruling SMSFR 2011/D1 (the draft ruling). The draft ruling explains key concepts relevant to borrowing in Superannuation funds. Importantly, the draft ruling clarifies the ATO's view on property improvements. Previously a SMSF was unable to improve an asset purchased using a loan, or to rebuild the asset in the event the asset was destroyed by fire, flood, cyclone or similar.
Fortunately, the ATO now takes a different approach. Paragraph 30 of the draft rulings says: "Although borrowings cannot be used to improve a single acquirable asset, money from other sources could be used to improve (or repair or maintain) that asset. However, any improvement must not result in the acquirable asset becoming a different asset" Essentially, this paragraph says that borrowed funds must not be used to improve an asset purchased using a loan agreement, but other cash in the fund can be used to improve the asset as long as the improvement does not change the asset to such an extent that it becomes a completely different asset.
So what is the difference between an improvement and a repair? Read more…
Are you an organisation or individual that provides finance secured by personal property?
Do you lease personal property or supply goods on a retention of title basis?
Personal property security (PPS) reform brings the different Commonwealth, state and territory laws and registers regarding security interests in personal property under one national system and introduces the Personal Property Securities Act 2009 (Cth) and a single national online register.
What are personal property securities?
Personal property listed on the PPS Register includes assets that may be used to secure a loan, such as cars, boats, crops and intellectual property. The PPS Register does not include real estate property, such as houses, land or water rights.
Personal Property Securities Register
The PPS Register will allow lenders and businesses to register their security interests. Secured parties, buyers and other interested parties can search the PPS Register to find out if a security interest is registered over the personal property. The PPS Register commences operation in October 2011 as a web-based register that will be accessible to search and register security interests 24 hours a day, seven days a week. Read more…
The Government removed the ability of minors (children under 18 years of age) to access the low income tax offset (LITO) on their unearned income on 1 July 2011.
This is clearly targeted at discretionary trusts where you can currently stream $3,333 tax free to each beneficiary child. Assistant Treasurer Bill Shorten has said this
“will enhance the fairness of the taxation system and discourage the tax avoidance that currently occurs when high income earners allocate their income to children under 18 years of age.”
The majority of clients I know who operate through a trust are not particularly “high income” at all. This may in fact hurt a lot of people who were doing the right thing, and have set up structures according to the rules at the time, only to have the rules changed at the last minute.
Income earned by minors from employment will still be eligible for the LITO. So send your children off to work, safe in the knowledge that by not being able to distribute any of the trust income to them you are helping save the government around $740 million.
It's amazing how the media can make the average person think along certain lines, and not pay much attention to others. Part of the Budget that was announced recently has still received far less media attention than I believe it should have.
What part am I talking about? Well, the government’s proposal to make company directors personally liable for their company’s failure to make employees’ superannuation payments of course. Now I am all for employers having to pay superannuation for their employees, I am an employee after all. But I think this may have harsh consequences for those businesses that employ contractors.
Read more…
This year's Federal Budget announced proposed changes to the motor vehicle Fringe Benefits Tax rules. Under the current Fringe Benefits Tax rules, there are two methods for calculating a motor vehicle's Fringe Benefits Tax:
1. The "Statutory Formula" that calculates Fringe Benefits Tax based on a percentage (statutory rate) of the motor vehicle's base value.
2. The "Operating Costs" method which calculates Fringe Benefits Tax based on the business travel percentage, per a 12 week log book.
The proposed changes will affect only how the Statutory Method is calculated. To be phased in over the next four years the Statutory Method will be calculated using a flat 20% statutory rate multiplied by the motor vehicle's base value. This replaces the current method where statutory rates range from 26% to 7% depending on how many kilometres are travelled (the more kilometres travelled within certain ranges, the lower the statutory rate). Read more…