Treasury Law Amendment 2019 & 2020 Update

Treasury Laws Amendment (2020 Measures No 3) Bill 2020

Treasury Laws Amendment (2020 Measures No 3) Bill 2020 has passed both Houses of Parliament and is now law.

Extending the Instant Asset Write-Off

This legislation amends the income tax law to allow a business with an aggregated turnover for the income year of less than $500 million to immediately deduct the cost of a depreciating asset (instant asset write-off).  The asset must cost less than a threshold of $150,000 and be first used or installed ready for use for a taxable purpose by 31 December 2020.  Without these amendments the $150,000 instant asset write-off would have ended on 30 June 2020.
By extending the previous end date of 30 June 2020 to 31 December 2020, the amendments give businesses additional time to access the $150,000 instant asset write-off for their acquisitions of depreciating assets, including those purchases that have been delayed by supply chain disruptions.  Further, the amendments extend cash flow support to businesses through the early stages of the recovery from the economic conditions caused by COVID-19.
It will be interesting to see if this timeframe is further extended at some later point.  Note that, come 1 January 2021, if there is no further extension, the $150,000 threshold for the instant asset write-off for depreciating assets will collapse to $1,000 and the turnover threshold for eligibility for the outright deduction of less than $500 million will fall to a turnover of less than $10 million.
Please contact our office here if you are considering purchasing a depreciating asset for your business and want to know if you will be eligible for the instant asset write-off.

Treasury Laws Amendment (2019 Measures No 3) Bill 2019

Treasury Laws Amendment (2019 Measures No 3) Bill 2019 has passed both Houses of Parliament and is now law.

Testamentary trusts and minors

This legislation contains amendments to ensure the tax concessions available to minors in relation to income from a testamentary trust only apply in respect of income generated from assets of the deceased estate that are transferred to the testamentary trust (or the proceeds of the disposal or investment of those assets).
Broadly speaking, when a trustee distributes income to a minor it is taxed at the highest marginal rate (plus Medicare levy).  However, there are certain exceptions to this rule.  One such exception is where the trust is a testamentary trust – being a trust that was established as a result of the will of a deceased individual.  Income from a testamentary trust is a type of ‘excepted trust income’ that is generally taxed at ordinary rates.
Prior to this legislation being passed, the previously existing law did not specify that the assessable income of the testamentary trust be derived from assets of the deceased estate (or assets representing assets of the deceased estate).  As a result, assets unrelated to a deceased estate that were injected into a testamentary trust may, subject to anti-avoidance rules, generate excepted trust income that was not subject to the higher tax rates on minors.  This was an unintended consequence, which allowed some taxpayers to inappropriately obtain the benefit of concessional tax treatment.
This legislation clarifies that excepted trust income of the testamentary trust must be derived from assets transferred to the testamentary trust from the deceased estate or from the accumulation of such income.
This change will apply in relation to assets acquired by or transferred to the trustee of a testamentary trust on or after 1 July 2019.
Please contact our office here if you have any concerns about testamentary trusts making distributions to minor beneficiaries.

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