AVZ Discussion 2022

[Jazz]

The question is will we get a choice with AVZ?

Not counting chickens but if we do get some sort of deal the structure of it is very much out of our hands

If it triggers one big tax/cgt event it would be a tax nightmare

Hence I'm trying to get ahead of the curve and working on the worse case scenario (one single massive tax event) then what are the other strategies available to minimise the pain????....... read "tax"!

Is it likely that a deal of any sort would even result in tax being payable in a 2025 tax return? With all the ins and outs of our current situation I would not have expected a taxable transaction to occur this side of July.

I’m not saying a deal can’t be done soon, but I’m assuming the date of any deal is not the date tax is calculated from for shareholders.

Anyone care to comment on their experience with other takeovers, or similar deals? What has been the timeline from announcement through to actual taxable transactions occurring for shareholders.?

 

[Thaz]

With the 3 year bring forward rule you can deposit 3 x $120k per person of after tax money into super in one year. This is called a non-conesssional contribution to your super. You cannot claim the $360k as a tax deduction, but you do not pay the 15% tax on the contribution to your super. Perhaps obviously, in the subsequent 2 years you cannot deposit any non-conesssional funds into your super.

This is a different scheme, that people are talking about.

They're referring to the: Unused concessional cap carry forward.

https://www.ato.gov.au/tax-rates-an...ation-rates-and-thresholds/contributions-caps

Unused concessional cap carry forward​

From 1 July 2018 if you have a total superannuation balance of less than $500,000 on 30 June of the previous financial year, you may be entitled to contribute more than the general concessional contributions cap and make additional concessional contributions for any unused amounts.

The first year you will be entitled to carry forward unused amounts is the 2019–20 financial year. Unused amounts are available for a maximum of 5 years, after which they will expire.


FYI - tax agents are not able to advise on whether someone should contribute into super - due to regulatory changes.. this requires an AFSL and a Statement of Advice. They can, however, advise you on what your unused concessional cap carry forward amount is, based on the ATO records. However, the ATO records may be out of date or incorrect, so you should also cross reference it with your own understanding (e.g. if you were employed for the last 5 years - one would expect that you would have used a portion of your concessional contributions cap over the last 5 years.


Few things to note
- Contributions to super to claim a deduction and to get your income below a certain amount will not avoid Division 293 Tax. This would be an additional 15% tax on the contributions made to your superfund in the years that you adjusted taxable income is greater than $250K (from the top of my head). This can be paid by the superfund or by you.

- The Deductible Contributions to super will be added back in determining your adjusted taxable income (for Centrelink reasons (child care rebate eligibility), MLS, etc).

General advice on this topic is highly not recommended as following general advice may result in inadvertent tax implications

So tax and/or financial advice should be sought when dealing with superannuation assets and funding/investment strategies.

Side note - my wife is a registered tax agent :^)

 

[PutUsernameHere]

Could accountants please confirm!?

For those who potentially stand to gain a substantial capital amount, you could take advantage of your unused concessional contributions (UCC)…

e.g. Capital gain of $1,000,000 - UCC (e.g. $100,000) = pay tax on $900,000 + 50% CGD for those eligible.

As well as reducing your tax and increasing super, you’ll also get 30% back on the $100,000 UCC… Hope this is correct and helps others out!

You need to consult an accountant or a financial adviser. If you have a gain of $1M, you will personally be taxed on that $1M gain, less a 50% CGT discount if applicable. So say $500,000 gets added to your assessable income.

You should also look up the limits on unused concessional contributions and eligibility to use them depends on meeting criteria such as your super not being over a certain balance.

If you met the criteria, you could use those contributions to affect/reduce your assessable income. In general, additional concessional contributions can be removed from your assessable income and are instead taxed at a flat rate of 15% in super. However, you also need to consider how Div 293 tax might come into play.

I personally don't know whether it's inclusive of all income or salary only. But if you had a net $500k gain, then you'd be over the income limit for Div 293 which adds an additional 15% tax on your contributions.

It would still likely be advantageous difference of 30% tax vs 47%, but just need to be aware there's limits and those are personal to each individuals situation.

 

[Randenj]

While we're on the topic of positive outcomes and tax minimisation, we may well be getting a payout before the end of this financial year.
Well one can only pray and hope of course

If you don't have private health cover, and your payout is going to be considerable, you could be in for a massive hit in the way of 1.5% extra tax for the medicare levy.
Even though there's only a few months left in the year, you can still take a small gamble to minimise it by taking out basic accident cover.
I decided to take that gamble 2 weeks ago when I worked out how much that would cost me otherwise.


Hope that helps someone too

Like all of us, I'm hoping for a resolution that may or may not involve a payout sooner rather than later, but for me, if it is to be a payout, then July 1 will do nicely. It then gives a clear 12 months to make wise decisions instead of rushed ones.

Edit 1: I might add, anything after July 1 is also ok, for the exact same reasons. Except for June 2026. But then, it too might be ok, because we'll have had (hopefully) immenent notifications of what is to come...........

 

[Retrobyte]

In 2003, a mate in Wollongong bet big on OXR

He pocketed >$3m profit in one hit. Capital Gains Tax, PAYG and other issues sucked the life out of his windfall and almost drove him mad. However, he still managed to drive around in a Lexus.

If I'm grossing $3m I'd choose better than a tarted up Toyota

 

[oxxa23]

This is a different scheme, that people are talking about.

They're referring to the: Unused concessional cap carry forward.

https://www.ato.gov.au/tax-rates-an...ation-rates-and-thresholds/contributions-caps

Unused concessional cap carry forward​

From 1 July 2018 if you have a total superannuation balance of less than $500,000 on 30 June of the previous financial year, you may be entitled to contribute more than the general concessional contributions cap and make additional concessional contributions for any unused amounts.

The first year you will be entitled to carry forward unused amounts is the 2019–20 financial year. Unused amounts are available for a maximum of 5 years, after which they will expire.


FYI - tax agents are not able to advise on whether someone should contribute into super - due to regulatory changes.. this requires an AFSL and a Statement of Advice. They can, however, advise you on what your unused concessional cap carry forward amount is, based on the ATO records. However, the ATO records may be out of date or incorrect, so you should also cross reference it with your own understanding (e.g. if you were employed for the last 5 years - one would expect that you would have used a portion of your concessional contributions cap over the last 5 years.


Few things to note
- Contributions to super to claim a deduction and to get your income below a certain amount will not avoid Division 293 Tax. This would be an additional 15% tax on the contributions made to your superfund in the years that you adjusted taxable income is greater than $250K (from the top of my head). This can be paid by the superfund or by you.

- The Deductible Contributions to super will be added back in determining your adjusted taxable income (for Centrelink reasons (child care rebate eligibility), MLS, etc).

General advice on this topic is highly not recommended as following general advice may result in inadvertent tax implications

So tax and/or financial advice should be sought when dealing with superannuation assets and funding/investment strategies.

Side note - my wife is a registered tax agent :^)

Agree on thaz's notes here...

But, my wife just spends the money I make as a tax agent... have an accounting firm.

There's a lot of minimisation strategies... but, it's horses for courses and depends on everyone's own financial position and plans/goals


If a transaction involved a sale of shares there's still a small chance it could happen this year. Although more likely next year... if it involved the sale of the project, then a dividend would be next year, not this year... the company would likely give people more time before declaring a framed dividend I would think... and avz pay some tax first

 

[Winenut]

Agree on the time horizon

Not necessarily expecting to have to deal with any major gain (if any) until the 2025/26 tax year (or beyond)

There's lots of great "pointers" and areas to explore that have been highlighted here but as @oxxa23 has rightfully pointed out everyone potentially has quite unique circumstances which affect how you may choose to deal with any gain event

Your age, who or what entity holds the shares, current balance of your super, other income (if any), whether you can crystalise any other share losses to offset CGT gains, how any deal is structured by AVZ and the other parties (entity sale/cash/scrip/dividend/trailing royalties) your domestic arrangements (single, spouse etc)

Certainly a minefied to navigate so best to get good, professional advice

This may be a once in a lifetime event......you don't want to fuck it up

I can't believe I did that winky thing.....

 

[Frank]

https://x.com/Thumpernats1/status/1911763090557047014

https://x.com/NewsTangan6635/status/1911726369752436924

 

[Ashlee]

Agree on thaz's notes here...

But, my wife just spends the money I make as a tax agent... have an accounting firm.

There's a lot of minimisation strategies... but, it's horses for courses and depends on everyone's own financial position and plans/goals


If a transaction involved a sale of shares there's still a small chance it could happen this year. Although more likely next year... if it involved the sale of the project, then a dividend would be next year, not this year... the company would likely give people more time before declaring a framed dividend I would think... and avz pay some tax first

I personally don’t want a dividend I want a capital return or something that triggers a CGT event.

 

[LOCKY82]

MSN

 

[Goldenboy]

Agree on the time horizon

Not necessarily expecting to have to deal with any major gain (if any) until the 2025/26 tax year (or beyond)

There's lots of great "pointers" and areas to explore that have been highlighted here but as @oxxa23 has rightfully pointed out everyone potentially has quite unique circumstances which affect how you may choose to deal with any gain event

Your age, who or what entity holds the shares, current balance of your super, other income (if any), whether you can crystalise any other share losses to offset CGT gains, how any deal is structured by AVZ and the other parties (entity sale/cash/scrip/dividend/trailing royalties) your domestic arrangements (single, spouse etc)

Certainly a minefied to navigate so best to get good, professional advice

This may be a once in a lifetime event......you don't want to fuck it up

I can't believe I did that winky thing.....

Ironic that all this tax money is going to be paid to the same bunch of c.——- that all rushed to our aid when we needed them most.

 

[Spikerama]

Ironic that all this tax money is going to be paid to the same bunch of c.——- that all rushed to our aid when we needed them most.

The incumbent or ruling party does not get paid the tax money. They don't own it. It goes to the state. It is state funds. True they may decide how it gets allocated back to funding certain things for the population but that is the same for any tax you pay.

There's an election coming up. "Vote early and vote often!"

 

[Spikerama]

Forty Seven. Ready your weapon.

 

[tonster66]

The incumbent or ruling party does not get paid the tax money. They don't own it. It goes to the state. It is state funds. True they may decide how it gets allocated back to funding certain things for the population but that is the same for any tax you pay.

There's an election coming up. "Vote early and vote often!"

LNP believed that Manono was in Australias national interest. LP has not lifted a finger to assist AVZ. Big difference

 

[Spikerama]

LNP believed that Manono was in Australias national interest. LP has not lifted a finger to assist AVZ. Big difference

LNP or the FIRB?

 

[RHyNO]

Ironic that all this tax money is going to be paid to the same bunch of c.——- that all rushed to our aid when we needed them most.

Anyone else up for a mass taxation refusal! Unless of course they offer to pay us out in Monrero.

 

[TheCount]

A tax deductible contribution to your super might be a good option too

In some circumstances I believe you can bring forward 3 years of contributions meaning you can contribute $300k in one year and claim it as a tax deduction

Pay 15% tax on the contribution to your super fund on the way in might be better than paying tax at higher marginal rates of 30%-37%-45% depending on how big your overall gains are

Later when in pension mode you can draw an income from your super fund tax free

But I'll leave the fancy tax talk to @TheCount .....I think he actually knows his fruit

EDIT: I think @Azzler was sort of touching on this same area......if that doesn't sound a bit too weird

EXTRA EDIT: I've apparently fked up on the tax deductibility thing....dammit

Appreciate your vote of confidence @Winenut - I am late to the conversation and can't disagree with the 2x learned opinions of @Thaz and @oxxa23 ...

I suggest you all consider engaging a paid tax agent (not financial adviser) to work through the plan piece by piece. I do not do my own taxes any more. Go in with your plan. Talk about it. Review it. Ask 100 questions. Write it all down. If you want a big Super balance, "how do I get there?". Log onto MyGov and have a look at your own Unused Concessional Cap value. Strategies can take a few years to come to fruition, and after the experience with AVZ you should all have built up a decent "patience" tolerance.

Many of the "benefits" of pumping money into Super only come with money that has already had tax paid on it. Should AVZ provide that liquidity, then map out a timeline of how you can achieve your goal. Just remember that once you put your hard-earned into Super, you can't get it out until "retirement". Patience.

I chose to use an SMSF and a separate Company structure (not the Trustee) to split my holdings and in fact the Co has double the holding of the SMSF for future planning. For example, I can leave my current consulting employment and join the Countess as an employee of that Co until retirement. The timing of that only depends on the valuation and proceeds from the sale of our AVZ.

The Co is hit with (factored into my calcs) 25% tax on earnings/profits (no CGT discount) and depending on what eventually happens (ie: 2026 tax year) the after-tax funds can be kept in the Co or fed into the SMSF via salary sacrificing or other simple measures. From an estate planning perspective I can pass on the structure to the kids without the impending death duties. To protect the family home, loans etc are all done in the company name.

CGT in the SMSF is taxed at 10% of the gain which is very generous. Work hard to balance Member account balances.

Other items to consider in your plans? Clearing a mortgage, investment property, what does retirement look like? I've mentioned before about REIT's paying 8% tax-free.

For everyone running an SMSF, understand the conditions to get it into Pension mode, such as:
- pays a minimum each year.
- cannot grow the balance by contributions or rollovers
- cannot use the balance against borrowings (use a Co like above??)

The underlying principle that I use for any calculations is "what is the tax treatment of my decision?".

Lots to work on and think about and I have always believed that AVZ was "the one" to provide financial freedom. Not long now till we see how that turns out......... at $12, my shout..

 

[Goldenboy]

Anyone else up for a mass taxation refusal! Unless of course they offer to pay us out in Monrero.

Absolutely. ….never going to happen though . Sold 200k at the start of Jan 21 to put down the house deposit. Cap gain tax was around $140k …. Payment plan to ATO attracts a 9.5% interest charge compounding !!!!!! Good money if you can get it ….C——-s !!

 

[Pokok]

Agree on the time horizon

Not necessarily expecting to have to deal with any major gain (if any) until the 2025/26 tax year (or beyond)

There's lots of great "pointers" and areas to explore that have been highlighted here but as @oxxa23 has rightfully pointed out everyone potentially has quite unique circumstances which affect how you may choose to deal with any gain event

Your age, who or what entity holds the shares, current balance of your super, other income (if any), whether you can crystalise any other share losses to offset CGT gains, how any deal is structured by AVZ and the other parties (entity sale/cash/scrip/dividend/trailing royalties) your domestic arrangements (single, spouse etc)

Certainly a minefied to navigate so best to get good, professional advice

This may be a once in a lifetime event......you don't want to fuck it up

I can't believe I did that winky thing.....

Share losses to offset CGT will be easy all I need to do is open my bottom draw , you know what peaves me more is the fact that the ATO will benefit from our long term pain and suffering and did not lift a finger nor recognize our situation

 

[tonster66]

LNP or the FIRB?

Frydenberg was in charge of FIRB at the time, was also the treasurer of Australia. He knew where the priorities were