McAdam Siemon : Accountants and Business Advisors

The Five-Minute Business Coach - November 2010

In this issue: Changes which may affect you and your business

Client alert - does the Bamford decision affect you?

Do you have a Discretionary or Family Trust? If yes, then the landmark Bamford case and the long-awaited decision between Bamford v. the Australian Commissioner of Taxation will potentially have an impact on you. We are now digesting the Australian Taxation Office's decision to crack down on discretionary trusts, and a new compliance issue has emerged concerning the ATO's reaction to the controversial case.

In a nutshell the issue is this: There has been a long-standing debate regarding the concepts which support the tax treatment of beneficiaries of a trust and how they are taxed. There are some very important consequences for taxpayers arising out of the decision.

First, the decision is expected to remove the risk for trusts with appropriate deeds, that capital gains made by trusts will not be taxed at the higher rates (by the trustee) if the trust doesn’t gain other income in the year. Instead, the capital gain will be taxed in the hands of the beneficiary.

Second, the Court decided that a beneficiary’s liability to tax regarding the trust’s taxable income is governed by their proportionate interest in the income, even when a beneficiary is only allocated a particular dollar sum.

It follows that if deeds (and in the case of discretionary trusts, resolutions) are not properly drafted, then beneficiaries may be taxed on more than they receive. We have already implemented the new resolutions to ensure they meet the requirements of the deed.

All deeds, pre the decision, will need to be reviewed and we are currently setting an efficient and cost effective process to deal with this.

This is a very important matter and needs to be handled correctly or there could be significant tax implications if not addressed. Please do not hesitate to contact us if you wish to discuss this further. For detailed information on the case visit: www.ato.gov.au

ATO crack down on business tax debts

Patience for slow or slack tax payments has officially come to an end at the Australian Tax Office (ATO), as it starts to take a more stringent approach to businesses that don't pay their tax debts.

The Australian Financial Review reports the ATO is ramping up efforts to collect tax debts owed by small businesses, which make up about 60 per cent of the $12.2 billion owed.

The ATO previously won praise for its compassionate stand on SME debt, but now appears set to start calling in outstanding amounts as the recuperating economy allows SMEs to stabilise their businesses.

Business and tax advisors are seeing a new flood of 'director penalty notices'. These are ATO orders that make directors personally liable for a company's tax debt.

Due to law changes in July, directors can now no longer enter a payment agreement with the ATO and have three options to repay their tax debt: shut down the company, appoint an administrator, or pay the amount.

If you've had a previous agreement for a repayment scheme, and you breach it, they are going to be much less accepting the next time around.

If you are an SME operator with outstanding tax debts, try and clear them up as quickly as possible, or at the very least make sure you meet your payment obligations.

If you receive a notice, please contact us immediately.

Equally, if you’re having any issues with the ATO, we encourage you to contact us so we can help you address it, or the ATO could make the decision for you.

Useful reminders...

ASIC annual fee increase

The annual fee for company lodgments with ASIC has increased from $212 to $218 effective 1 July 2010. The fees are indexed each year in line with the CPI.

Payroll Tax Reminder

All businesses paying in excess of $1m in wages, superannuation, certain allowances and fringe benefits, are now required to register for payroll tax. It is then applied on a sliding scale up to $2.1million, after which the rate of 4.5% is applied. Certain sub contractors can also be caught within the payroll tax total if they meet certain conditions.

As this is a State government tax, it can be cross checked with Workcover to ensure compliance. Non compliance or failure to register can result in significant interest and penalties, so if you believe you may be liable for payroll tax, please contact us and we’ll do the checking for you.

Quote of the Month:

“When you have to make a choice and don't make it, that is in itself a choice.” ~William James

If you are considering a review of your business situation, the highly professional and proactive team at McAdam Siemon would welcome the opportunity to discuss the ways we can meet your needs.

November 2010