As from today 1st of November 2021 if you are a Director of an Australian registered Company, the government has introduced Director Identification Number this is an unique identifier all Directors need to apply for once and will keep forever (much like a tax file number).

Director ID requirements apply to appointed Directors and acting Directors of Australian corporations and registered foreign companies under the Corporations Act 2001 (Cth), including companies responsible for managed investment schemes and registered charities. 

Directors must apply for a Director ID themselves, so that their identity can be verified. No one can apply on their behalf.

The Director ID regime is intended to tackle illegal ‘phoenixing’ activities and increase Director accountability and traceability. Director ID will be recorded in a new database to be administered and operated by the Australian Taxation Office and be made available to the public.

IMPORTANT: All existing Directors will need a Director ID in place by 30 November 2022

Registrations open for existing Company Directors on 1st November 2021 with a 13 month deadline

Any new Directors from 1st November 2021 will have 28 days to apply for their Director ID 
After 5 April 2022 a Director ID will need to be held before appointment

To apply for a Director ID, Directors will need to have a myGovID. It is important to note this is different to a myGov Account. More information on myGovID and how to apply can be found here.  They will need to verify their identity during the process.

Apply for Director ID here https://www.abrs.gov.au/director-identification-number

Please reach out to your Harris Black team member if you have any questions or need assistance.

When it’s time to upgrade your main residence and start renting out your old main residence, you can set your cost base in one of two ways:

1. Calculate the purchase price, any holding costs and capital improvements whilst the property was your main residence; or
   
2. Get a valuation at the time the property is first used to produce income.

Option 2 is usually the best scenario however only works if the property was your main residence first.

Option 2 does not work if the property is an investment property, then a main residence and then a rental property again.

Please contact us if you would like to discuss further or have any questions.

By Bjorn Kirberg

In Part 1 and Part 2 we covered the basic conditions of the CGT Small Business Concessions.

Part 3 will cover the common scenario where the asset being sold is a share in a company or an interest in a trust.  This is especially helpful in Queensland to avoid stamp duty.

If the asset being sold is a share in a company or an interest in a trust, it must meet additional conditions outlined below.  These rules were expanded in 2018 to ensure that the entity itself being sold could not be worth more than $6 million, which significantly narrowed the number of taxpayers eligible.

(1) Just before the CGT event, either:

(i) The taxpayer must be a CGT concession stakeholder in the company or trust; or

(ii) CGT concession stakeholders in the company or trust had a total small business participation percentage in the taxpayer claiming the concession of at least 90%.

(2) Unless the taxpayer satisfies the maximum net asset value test, it must be carrying on a business just prior to the CGT event.

(3) The company or trust must either be a CGT small business entity (below $2 million aggregated turnover) for the income year or satisfy the maximum net asset value test (net assets below $6 million).

(4) The share in the company or interest in the trust must satisfy a modified active asset test (MAAT).  Work out the total market value of both:

(i) the assets of the company or trust and

(ii) the assets of any later (interposed) entity in which the taxpayer has a small business participation percentage, multiplied by that percentage.

To meet the MAAT, at least 80% (the 80% test) of the above assets must be made up of:

active assets and

cash or financial instruments inherently connected with the business carried on by the company/trust or a later entity

Definitions

A CGT Concession stakeholder of a company or trust is a significant individual in the company or trust, or the spouse of a significant individual where the spouse has a small business participation percentage in the company or trust.

Small business participation percentage is the sum of the direct and indirect small business participation interests.

A significant individual has a small business participation percentage in the company or trust of at least 20%.

These rules are very complex and this is just an overview. Please contact us if you would like to discuss further or have any questions

Despite owning multiple properties, you cannot simply choose which property is your main residence to suit the best capital gains tax outcome at the time of sale.  In order to claim the Main Residence Exemption from CGT at the time of sale there is a need to establish the property as your main residence. 

Generally speaking, your main residence is considered to be the address at which you most frequently reside and is that recorded:

• on the Electoral Role;
• on your driver’s licence;
• with the ATO; and
• with your bank.

The existence of an electricity account and internet account in your name for the address and even photos of you residing at the property can also help establish a property as your main residence.