Dividend washing occurs when shareholders seek to claim two sets of franking credits on what is effectively the same parcel of shares.
The Proposed new integrity rule is intended to:
apply from 1 July 2013
• be inserted into the Income Tax Assessment Act 1997
• be activated to the extent that an entity, or an associate of an entity, disposes of the membership interest without the right to the dividend (ex-dividend) and then acquires a substantially identical membership interest with the right to the dividend (cum-dividend)
• ensure, when activated, that the entity would not entitled to the additional franking credit tax offset on the distribution on the membership interest acquired with the right to the dividend, and the amount of the franking credit on that distribution would not be included in the assessable income of the entity
• not affect typical small retail investors, because it will only apply to investors who have franking credit tax offset entitlements in excess of $5,000.
CGT Discount For Foreign Resident Individuals
The CGT discount, previously known as the CGT 50% discount, was available to foreign resident individuals on taxable Australian property.
In the 2012–13 Budget, the government announced changes to the application of the CGT discount. These changes became law on 29 June 2013.
From 8 May 2012, foreign or temporary resident individuals must meet certain eligibility conditions to apply the CGT discount.
For CGT events occurring after 8 May 2012, the application of a CGT discount percentage will depend on:
whether the CGT asset was held before or after 8 May 2012, and
the residency status of the individual who has the capital gain.
This change affects individuals (including a beneficiary of a trust and a partner in a partnership), who are:
a foreign or temporary resident
an Australian resident with a period of foreign residency after that date
had a discount capital gain from a CGT event that occurred after 8 May 2012.
If you are unsure about your residency status, you can use our Determination of residency tool.
You are not affected by this change if the CGT event occurred before 8 May 2012.
The Changes Affect Foreign Or Temporary Residents
You must calculate the CGT discount you can apply to the capital gain if you are a foreign or temporary resident individual and, after 8 May 2012, you have a discount capital gain from a CGT event.
If you were a foreign or temporary resident on 8 May 2012, you may choose to get a market value for the CGT asset as at 8 May 2012 and use a market value calculation. This will apportion the CGT discount to take into account the capital gain you have that was accrued before 8 May 2012.
You must calculate the CGT discount you can apply to the capital gain you have if you are an Australian resident and, after 8 May 2012, you have:
• a capital gain from a CGT event, and
• a period of foreign or temporary residency.
The period of foreign or temporary residency after 8 May 2012 is taken into account when calculating the CGT discount you can apply to your capital gain.
Private Health Insurance Rebate Changes
There are changes to the way the private health insurance rebate (PHI) is calculated and applied to premiums.
From 1 April 2014, rebate percentages are adjusted annually by a rebate adjustment factor. The rebate adjustment factor averages the increase in the consumer price index and the premium price increase from insurers. It is calculated by the Department of Health each year.
The adjusted rebate percentages are applied to premiums paid on or after 1 April. This means client’s rebate before 1 April will be different to the rebate on or after 1 April.
Lifetime health cover loading
From 1 July 2013, the rebate will be calculated on the premium minus any Lifetime Health Cover (LHC) loading. LHC loading is a penalty that applies to individuals who have not taken out and maintained PHI from the year they turned 31.
This means the private health insurance rebate may be calculated on an amount which is less than the total cost of the policy, reducing the amount of rebate your client is eligible to receive.
These changes will be automatically applied to the policy and clients don’t need to do anything.