Posted on August 16, 2016 by Ashley Dawson
When you use a tax agent such as GeersSullivan to prepare and lodge your Tax Returns, Fringe Benefits Tax Returns and Activity Statements, you benefit from an extension of the due dates to lodge these documents. For example, if you prepare your own tax return using the Tax Pack or e-Tax software you will have to lodge your return by the 31st October each year. Depending on your circumstances you can have this extended to as far out as May the following year if you are with a registered tax agent. Another example of this is the automatic four week extension on the due date for lodging quarterly Business Activity Statements.
These lodgement concessions serve a number of important purposes and assist us in spreading our workload throughout the year. They can also be used to assist in managing the cashflow of your business by deferring lodgement and payment to the latest possible date.
We at GeersSullivan work with our clients who for whatever reason are unable to meet the Tax Office’s due dates. However legislative changes has put more onus on us to act as the Tax Office’s ‘police’.
As of 1 July 2013, tax agents are required to lodge 85% or more of their clients’ current year returns by the lodgement program due date, or by the deferred due date if a deferral is granted. It should be noted at this point that even if you don’t think you need to lodge a return with the Tax Office for whatever reason (i.e. your income is too low or you have moved overseas), you still need to lodge a form to advise them of this otherwise you will be considered an overdue return.
Overdue returns are charged a flat penalty of $180 per month for each month they are overdue up to a maximum of $900, plus any interest on overdue tax for individuals and small business entities. Large business entities can be up to as much as $4,500 plus any interest on overdue tax.
If the agents’ yearly averaged performance percentage does not meet the 85% benchmark, the Tax Office can remove access to the concessional lodgement program. As these concessions are fundamental to the functioning of a tax agents business, the threat of losing its concessions has forced many agents to review their client lists and remove those clients that aren’t actively working with their agents to bring their outstanding returns up to date. The Tax Office has encouraged this by providing a mechanism to delete bulk clients from lodgement lists.
Although the majority of our clients are up to date, if you do have concerns that you are behind or unable to meet the upcoming due dates, we encourage you to discuss this with us prior to the due date so we can make alternate arrangements with the Tax Office and allow us as a firm to continue to provide you with the extended dates to lodge your returns.
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Posted on by Tom Francis
Legislation that was recently passed allowing small businesses to change their legal structure without incurring capital gains tax was touted by the Government as a simple solution for organisations that have experienced substantial growth since inception. Businesses started as a partnership or sole trader were now able to roll their operation into a new structure that would provide greater opportunities to grow further or access additional legal protections.
Unfortunately restrictions contained in the legislation have meant many small business owners, especially those who have been operating for several years already, are unable to take advantage of the new concessions.
However options do exist for entities locked out of the concessions and at GeersSullivan we have put together several successful strategies in the past few months utilizing the methods detailed below. Each method has been fully endorsed by the ATO as complying with current tax legislation or tested in the Court system, providing additional comfort that your affairs are within the letter and spirit of the law.
Corporate Beneficiaries
For businesses operating as a trust one of the major concerns is how to reduce tax on profits re-invested in the business. Setting up a corporate beneficiary allows profits to be taxed at the fixed corporate tax rate and retained within the business for up to 10 years. During this time we work with clients to actively manage their tax liabilities each year which results in a lower average rate of tax.
Service Trusts
For professionals such as doctors, pharmacists and lawyers, setting up a service trust allows the administration and retail function of the business to be separated from the professional and with it a share of the profits. These profits can be distributed to beneficiaries with a lower tax rate or the strategy can be combined with a Corporate Beneficiary to assist with profits being reinvested in the business.
Capital Re-structure
Companies remain a popular choice for operating a business due to their fixed tax rate, options to split ownership with unrelated partners and limited liability. With careful planning they can also be very flexible especially around admitting or retiring an owner. Share buy backs can be employed to exit an owner using a franked dividend where a capital gain is not practical. New shares are also able to be issued, subject to the value shifting limit, to an existing or new owner for no consideration without generating a tax liability. This is especially popular where a new owner brings necessary skills to a business rather than cash or assets.
Small Business CGT Concessions
While the whole-business rollover may not be available, the criteria for applying other small business CGT concessions can be lower and this can be used to move certain business assets from one entity to another without generating large tax debts. This concession also allows for tax effective super contributions to offset tax liabilities.
Economic conditions in Australia, and especially in Perth, are currently challenging and set to remain so for 12 months or more. For businesses struggling with a tough market the additional burden of an ineffective tax structure can be the straw that breaks the camel’s back. If you believe your structure is no longer suitable, we would like to hear from you and encourage you to contact your accountant to schedule a complimentary exploratory meeting to see if there is anything we can offer.
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