ATO gives example of child being given $180,000 then repaying it to parents for cost of bringing them up as going against community expectations.
https://www.theguardian.com/australia-news/2022/jun/26/austr…
Australian Taxation Office Crackdown on Family Trust Rorts Causes Alarm among Tax Advisers
deme on 26/06/2022 - 09:51
Comments
who did they buy it from?
Look up Con Hindi. He lived up the road from me. Both his kids had multi-million dollar property portfolios. They must be such great savers to afford such properties..
This is from 2015. Ex-Councillor Hindi is currently the subject of an ICAC Investigation.
https://www.smh.com.au/national/nsw/hurstville-mayor-con-hin…
His surname is so confusing if you speak Hindi :D
Using children to buy assets is how people can have nice things.
Good.
It's just Tax Avoidance not Evasion (tm)
This is old news.
The whole issue is whether someone is getting an economic benefit of the trust. If they are then all is ok. If not then that’s where the tax dept have an issue…
Will Gerry and his buddies who received the JobKeeper payments be made to pay back that money?
If you give money to rich people, it will trickle down their legs and give you jobs, just be grateful for that.
Is it June already…
if there was one thing i agreed with Bill Shorten when he went for PM was his policy on family Trusts the government needs to do a MASSIVE crack down.
They should be used to protect assets not 'avoid tax' for rich flogs
i honestly think Australia would be better off with a flat tax structure everyone pays 20 percent of what they own, no deductions, no excuses, no loopholes. Sick of hearing some flog making billions paying less then 2 percent of his income in tax whilst working people pay 30 cents to the dollar
make society cashless to stop the cash tax rip off that so many solo traders and small businesses use to avoid tax and lets me a system that is fair
i honestly think Australia would be better off with a flat tax structure everyone pays 20 percent of what they own, no deductions, no excuses, no loopholes.
There is a gap between the company rate of 25% and the highest marginal rate of 47%.
Narrow that gap and you’ll have a more efficient tax system. In my opinion..
They should be used to protect assets not 'avoid tax' for rich blogs
Avoiding taxes is protecting assets.
Avoiding taxes is protecting assets.
incorrect - protecting assets is if you want to 'give' your child a house or a place to live but you dont want there 'defacto' relationship to take after the house if the relationship doesnt work out.
Trusts are effective ways of distributing assets to protect them from things like divorce, litigation etc - i personally have no issue with this as i think the 'defacto' laws in Australia are a joke but Trusts should not be allowed to 'avoid' tax.
it can also be easier to get insurance if you distribute asset and easier to borrow funds for investments if you collateralize different parts of you assets
There is a gap between the company rate of 25% and the highest marginal rate of 47%.
fair enough make a flat tax structure at 25 percent - everyone pays and everyone benefits no one doesnt pull there weight and no one cheats. Sounds like the fairest system to me
Trusts should not be allowed to 'avoid' tax.
Everything is fair game as long as it's legal and they can get away with it.
@Trying2SaveABuck: Yes, the rule needs a massive overhaul. But it won't happen. Who do you think made those rules in the first place?
I think it is fine to still have the tax brackets. However, the main issue is that there are too many different categories of income and massive exceptions and exemptions. By nature, that creates loopholes which make smarter people benefit more by gaming the system. So for individuals, just make the tax law dead simple:
- Set the max top bracket to 20%, slightly smaller than the company tax. Tax free for under 20K income, 10% for 20K to 50K.
- No special rules for different types of incomes, occupations, etc.
- No deductions at all, for everyone.
- Since it is so simple, no need for personal tax accountant.
You work for $100, you pay tax $20, no exceptions.
You work for $100, you pay tax $20, no exceptions.
i could live with this and i honestly think it would be more fair if everyone paid the same and we got rid of deductions negative gearing.
@leiiv: "Set the max top bracket to 20%, slightly smaller than the company tax. Tax free for under 20K income, 10% for 20K to 50K.
No special rules for different types of incomes, occupations, etc.
No deductions at all, for everyone.
Since it is so simple, no need for personal tax accountant.
You work for $100, you pay tax $20, no exceptions"It's simple, in the same way "Everyone pays $4" is simple; it wouldn't work.
If it costs me $9 to build a birdhouse, and I sell it for $10, then I put $1 in the bank, and then the ATO sends me a tax bill for $2. That's $1 more than what I have.
@CrowReally: It means you run a business and it should be treated as a business taxed at 25% with its own more complex rules. When the business pay salary to the employee, eg you, then that salary is taxed according to the individual tax rules, just like in the current system.
@leiiv: It would be a lot faster if you just come out and say "I have no idea how the taxation system works and it was foolish to start from that and try to design changes to it". I mean, get rid of deductions entirely? Apparently not know the legal difference between being a company and being a sole trader?
Why would there being a "business" involved get rid of the above birdhouse scenario where someone with $1 in the bank is getting a $2 tax bill? It's either an individual on 20% tax getting a $2 tax bill with $1 in the bank or.. a company with a 25% tax rate getting a $2.50 tax bill with $1 in the bank. Neither works.
@CrowReally: Simple, legal definition is what defined in the law, if the law changes, the definition changes too. There should only be two categories on taxation: business and individual. A business can be a company, sole trader, etc and the tax rules for business will have all the necessary stuff such as deductions. So with your example of building the birdhouse:
The business net profit is $1, it will get taxed $0.25, so you are left with $0.75. If the business decides to pay you, the owner, a salary of $1 as an employee, then as an individual you are taxed $0.2 (or $0 if your total income is below the tax free threshold). The business gets $0 tax bill as it has $0 profit. If instead of salary the profit is distributed as dividend, you get $0.75 and pay no more tax.@leiiv: You're ignoring so many things. I mean, is a super fund a business or an individual?
Apparently "individuals" can't be in business. (I'm glad you're now allowing deductions again (which is how net profit is arrived at) but saying only businesses get to claim expenses is just exacerbating the problem).
If we decided to allow for that (I mean, why, but let's pretend) and then deductions are only allowed for "businesses" and individuals who get a salary don't get deductions, you get situations where people are out of pocket for tax costs (e.g. your business sends you a year end summary of your salary for you to sign as correct by registered post, you don't get paid until you sign it as being correct and send it back as registered post. You're both required to spend $20 to do this to ensure you get paid - they get a deduction, you don't. Why? Does that make sense?)
And passive income is absent (A company has $100,000 in the bank and is earning interest on it. Is it business income? If so, would an individual with $100,000 in the bank earning interest get a different tax rate? Why?)
"If the business decides to pay you, the owner, a salary of $1 as an employee, then as an individual you are taxed $0.2 (or $0 if your total income is below the tax free threshold). The business gets $0 tax bill as it has $0 profit. If instead of salary the profit is distributed as dividend, you get $0.75 and pay no more tax." - okay, so basically owners get a tax advantage to always paying themselves wages and never paying themselves dividends? Does that make sense?
Right now anyone earning more than $45K is paying tax at 32% (and higher in various stages beyond that) - this is most of all individual Australians paying tax. You're now dropping the boom and everyone, Gina Rhinehart included, is paying 20% tax. You've vaporised billions of dollars of tax revenue. Who's making up the shortfall?
Tax law is a complicated beast that covers thousands of pages of legislation and deals with all sorts of special cases to address how complex the underlying economy is. New rules get added every year, and old rules are changes to match ongoing circumstances. You've oversimplified and made a broken system. "it's all business, right? that or people" makes about as much sense as "Why don't we all pay $4".
The whole taxing income needs to change.
i agree, but it needs to change for all 'workers' from the lowest to highest income earners it needs to be fairer and we need to be 'cashless'
Zero tax on income is a change.
it could work, in a society like in Monaco however the 'tax' would be based on usage or services ie you will be paying like 100% GST on items (or a tax similar to GST).
i dont know if it support getting rid of income tax all together i just reckon the system needs to be flatter and more fair.
We need to break away from this idea full time is 38 hours a week 9-5 Monday-Friday mentality - we should be encouraging people to work as much as they can within a healthy work life balance discouraging 'hard work' by excessive taxation.
we also need to crack down on people who 'pocket cash' by going cashless
Land tax and VAT are the way.
it won't ever happen our leaders all own multiple properties our Prime mister has like 5 houses in Sydney they wont 'tax themselves' they are all working in self interest.
Zero tax on income is a change.
That is even better.
Land tax and VAT are the way.
Not only land tax, it needs to be any properties in which it's ownership is enforced by government. This includes intellectual properties, patents etc.
And all natural resources must be taxed accordingly as well.
it needs to be any properties in which it's ownership is enforced by government
Agreed. You are describing a wealth tax, not income tax.
@afoveht: A wealth tax on personal property doesn't work.
People can do a one-off sale to an entity outside of the local jurisdiction and never pay taxes on the assets again.
@rektrading: Fine. They are then no longer protected by the local jurisdiction. One of the state's primary functions is to enforce property rights - it's nigh impossible to have out of control assets without the state threatening to punish others for touching them.
And in any event the wealth tax may include specific provisions for such intentional dodgy sales.
Other jurisdictions can follow or not as they see fit. Eventually all the mega-wealthy will find themselves in one place, and they can have it.
You should also stop using the term personal property where you mean private property. Personal property is naturally defined by use and occupation, private property by (threat of) (state) violence.
@rektrading: What do you mean by real property? Is virtual property real? What about Intellectual Property or other non-tangible things ranging from domain names to the rights to use telecommunication spectrum?
I think only the limited natural resources or artificially limited rights that are essential to society should be taxed progressively, and continuously (eg yearly) not just whenever there is a sale or ownership change.
If I have a rock worth one million dollars now, the government should not care as it may be worth $1 the next day and tax already been paid when it was mined.What do you mean by real property?
In English common law, real property, real estate, immovable property or, solely in the US, realty, is land which is the property of some person and all structures (also called improvements or fixtures) integrated with or affixed to the land, including crops, buildings, machinery, wells, dams, ponds, mines, canals, and roads, among other things. The term is historic, arising from the now-discontinued form of action, which distinguished between real property disputes and personal property disputes. Personal property, or personalty, was, and continues to be, all property that is not real property.
Trusts are not effective in matters of divorce, there is significant history whereby the family courts ignore the structures
Trusts are not effective in matters of divorce, there is significant history whereby the family courts ignore the structures
im not an 'expert' and i dont have a trust but i know people who do this is what they have told me….
EOFY 😂
It should be known that s100a was introduced to stop income being distributed to tax exempt entities (I.e. religious institutions) but no economic benefit was paid.
There was a carve out in the law to allow for ‘ordinary family dealings’ to be exempt from this law. The ATO are simply interpreting this term in their way and these determinations have been introduced to illustrate their view.
I love how most people say got to stop the "rich" reducing their tax by not allowing/changing structures to reduce tax. There is so much tax fraud going on in the cash/trades and most simply think it is funny. Getting trades people to continue to offer to prices cash/non cash is just rorting.
Completely, and the funniest thing is the discounts given aren't even close to the benefits they get.
At minimum they aren't paying GST, so there is 1/11th of the price, plus then not paying income tax, which is likely 30%+
If the tradie isn't offering you at least 20% off, they're keeping the vast majority of their evasory gain. That's before acknowledging that they likely still claim all the deductions with no associated income for that job, so their benefit is greater
Yes the ATO must have a crackdown on it too and that obviously needs to be prioritised. But have they? Maybe because it is just too difficult to do that? Easier to just target the low hanging fruit..
Reminds me when the government first bought out the new home owners grant and gave all new home owners a $20,000 head start… And then all the rich arseholes ruined it by having their "kids" buy their "first house". There were reports of kids as young as 3 were on the paperwork as "buying their first house."
This is why we cant have nice things.