Archive for category: News

Today, Treasury has released a consultation paper relating to the proposed amendments to the Div 7A rules that are due to apply from 1 July 2019.

The release of this paper is significant as it is the first detail provided by the Government on how the new proposed rules are intended to apply.

Prior to today’s release, the Board of Taxation’s report outlining recommendations to Government (finalised in 2014) was all we had available as a guide on how the new rules may be applied. Treasury has made substantial changes from those original recommendations.

The notable points that may affect your group are:

• New Div 7A loans will be straight line 10 year – principal and interest paid each year (previously 7 years)
• Interest rate will increase from current ATO benchmark rates, and will be the “Small business; Variable; Other; Overdraft – Indicator Lending rate most recently published by the Reserve Bank of Australia prior to the start of each income year”. This will result in substantially higher interest and repayments over the term of the loan
• Existing Div 7A loans will transition to new rules, however loan terms will not be extended
• 25 year loans WILL NOT be grandfathered. Transitional rules will allow for 2 years to transfer the loan to a new 10 year loan. Failure to convert these loans will result in a deemed dividend
• The concept of “distributable surplus” is being removed – this will result in previously exempt loans and payments being captured by the Div 7A rules and triggering tax that previously would not be payable
• Self-correction mechanism will apply to rectify Div 7A breaches – make good catch up payments will be allowed
• Amendment period relating to Div 7A loans, payments and forgiveness will extend to 14 years as an integrity measure (up from 5 year amendment period)
• Post December 2009 Unpaid Present Entitlements (UPE’s) will be captured by the new Div 7A rules (this includes Sub Trust arrangements set up under the Practice Statement 2010/4)
• IMPORTANTLY, IT IS STILL NOT YET CLEAR whether Pre December 2009 Unpaid Present Entitlements (UPE’s) will be included in the new rules. The consultation paper is specifically asking feedback asking “Should UPEs arising prior to 16 December 2009 be brought within Division 7A?”
  The proposed changes will affect a large number of taxpayers and in some instances will require proactive tax planning to ensure tax effective structures are maintained during the transition.

We will continue to keep you informed of the changes as further updates come to hand.

Despite the fundamental importance of succession planning, it is often neglected in current business/farming management practice.

Business owners/farmers should recognise that the need for a fully discussed succession plan is paramount in any business/farming situation. A natural progression from one generation to the next (or in case of unexpected or premature death) through the deceased’s Will. Poor succession planning is the cause of much “hurt in business/rural Australia.” Read more

We want to be the Accountant who will Challenge, Attack, Question, Confront, Dare, Provoke, Contest, Assault, Invade, Blast you on the way you operate your business.

The key areas of any Business that require ongoing maintenance to ensure the Health and Wealth of your business are: Read more

Improving the value of your business is not just about selling. It’s about running the most successful business you can.

The Theory

There are many ways to value a business, however the most commonly used valuation methodology for a profitable trading business is the Capitalisation of Profits Methodology.

This methodology is based on the average earnings of the business (before interest and tax – EBIT) multiplied by a capitalisation rate.

Therefore to increase the value of your business, a business owner should focus on: Read more

Why Consider the Contractor issue now?

The contractor issue is not at all new, nor has it been subject to any dramatic recent change.  However there are a number of diverse factors that have brought this issue back to the spotlight.

1. Growth in the number of Contractors: The attractions of contractors are many: a substantial release from the growing obligations that employers face and the flexibility which comes with being able to gain or shed resources in line with needs and the business cycle, just to name a couple.
2. Government / Treasury Attention: The new contractor reporting regime which will apply to the building and construction industry from 1 July 2012 is the most obvious example of measures to examine contractor arrangements.
3. Tax Office Attention: The Tax Office’s compliance plan for 2012 is reason enough to note how important the contractor issue has become.
4. Institutional attention:  It is reasonable to expect that union scrutiny of contractor arrangements will continue.

Read more

The new legislation containing changes to the current Living Away From Home Allowances (“LAFHA”) regime was recently passed. For employers with LAFHA arrangements entered into after 8 May 2012, the new rules will apply from 1 October 2012.
The new rules require the following from the employers and/or employees: Read more

The ATO has recently released details of a data-matching program focusing on contractor payments. Under the program, the ATO intends to collect information in relation to payments made to contractors for the 2009-2010 to the 2011-2012 income years by businesses audited by the ATO’s employer obligations area. Read more

A recent case before the AAT has highlighted the need for businesses to maintain appropriate records of plant and equipment used in business. Read more

The Government’s mid-year budget update was handed down in late October 2012. The Treasurer revised down the expected Budget underlying cash surplus to $1.1 billion for 2012 – 2013 down from $1.5 billion estimated in the May 2012 Budget. Read more