US Tax Return filing obligations – Changes to extension of time

Recently enacted legislation that was signed into law by President Obama on 31 July 2015 changes the United States (US) tax return filing dates for corporate, partnership, and certain other returns filed for tax years beginning after 31 December 2015.

For Australian unit trusts with a 30 June year end, which file US Federal Form 1120-F as a corporation, the original due date is still 15 September. However, these entities will have a 7 month automatic extension to 15 April of the following year. This is effective for tax years beginning after 31 December 2015.

While the legislation provides for a 5½ month maximum extension for trusts which file Form 1041, the legislation does not cover non US trusts (which typically would include Australian superannuation funds) which file Form 1040NR.

Guidance has been sought regarding the extension period from the US Internal Revenue Service for superannuation funds which file US Form 1040NR as a ‘Complex Trust’.

Unclaimed superannuation money

The Commonwealth Treasury has released an exposure draft of Superannuation Laws Amendment (Unclaimed Superannuation Money) Regulation 2015 which proposes to reduce red tape for superannuation funds and individuals by streamlining lost and unclaimed superannuation administrative arrangements. The proposed measure:

  • allows Eligible Rollover Funds, which are temporary repositories for inactive superannuation accounts, to proactively consolidate accounts they hold into the active superannuation accounts of members without their consent
  • ensures that members who interact with their superannuation fund through contemporary means of communication such as email and online interactions, are not inadvertently deemed to be lost members, and
  • removes an outdated rule that prevents the identification of certain lost inactive members, that is by removing the 'employer-sponsored' members rule.

It is proposed that the changes will apply from 30 June 2016.

Penalties for unauthorised withdrawals from Self-Managed Super Funds (SMSF)

In Deputy Commissioner of Taxation (Superannuation) v Ryan [2015] FCA 1037 (Ryan) the trustees withdrew amounts from their SMSF to meet their personal expenses and consequently breached the ‘sole purpose test’. Some withdrawals were made as unsecured loans, had no interest rate and no repayment term. Other withdrawals were not repaid.

The Deputy Commissioner disqualified each of the trustees from being a trustee of a superannuation entity, under s 126A of the SIS Act and commenced proceedings for contraventions of the SIS Act.

The court found the contraventions in this case, amounting to almost the entire value of the Fund, put the savings of the trustee members at risk and did so in circumstances in which their contraventions were deliberate, repeated over a period of three years and were not first contraventions.

Taking all the circumstances into account and after considering the decisions in a number of other cases, the court considered that that the appropriate pecuniary penalty was $20,000 for each trustee.