Two new cases before the Administrative Appeals Tribunal demonstrate how serious the Australian Taxation Office (ATO) is about making sure professional services firms - lawyers, accountants, architects, medical practices, engineers, architects etc., – are appropriately taxed.
In both cases, the ATO pursued the practices using Part IVA. Part IVA is an area of the income tax law that enables the
Tax Commissioner to attack schemes or arrangements undertaken to obtain a tax benefit, enabling him to cancel any benefit derived by the
scheme.
That is, you could have a legally viable structure in place but if the only purpose of that structure is to reduce tax, then the
Commissioner can use Part IVA to remove the tax benefit. And, if Part IVA applies, you may end up with an additional tax liability as
well as an administrative penalty of either 25% or 50% of the tax shortfall amount.
Broadly, the cases involved a solicitor who controlled a number of practice trusts that derived profits through marketing and facilitating
tax planning arrangements.
While the arrangement in each case was complex and involved a large number of steps, the practice trusts ensured their business profits
weren’t subject to tax by essentially making trust distributions on paper through a series of trusts and ultimately to either a company that
had existing tax losses, or a tax-exempt entity.
However, the real funds relating to the trust distribution (less a commission paid for the use of these entities) were ultimately
received by the solicitor or their associated entities in the form of a loan.
Professional practices have been in the ATO spotlight for many years now for the way they distribute profits. Back in 2021, the ATO
finalised its guidance on the allocation of professional firm profits, putting in place a series of risk ratings and gateway tests.
These two cases however demonstrate the ATO’s willingness to pursue the issue in the courts using the Commissioner’s powers in Part IVA.
For professional services firms, it’s important to be aware that there are several ways in which the ATO can potentially challenge
arrangements involving the distribution of profits from a professional practice. For example:
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Taking time to ask yourself the big questions can be daunting and empowering at the same time. Understanding and prioritising your goals and needs is a valuable step.
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ATO getting about as serious as they can get with their non-public debt recovery measures.
Our new system enables us to download all ATO mail on behalf of our clients and distribute it in the most efficient manner possible.
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I was looking for a business advisor to help me better understand my business and the story that the numbers are telling me. I thought
I knew my business and its strengths and weaknesses. Having the skilled team at SMART involved in my business and working
on regular financial reporting has helped me see a clearer picture of how my business is doing.
We were looking for a new accountant that would act more like partners in the business. We wanted a team that would guide us towards growth. We interviewed three different firms and were absolutely blown away by the team at SMART and what they could do for us. Five years on and we continue to be blown away.
A new report reveals rezoning the Mornington Peninsula as regional would not only unlock more funding but would fix social and economic inequalities.
10 March 2022 @ Mercetta, Mornington
Join our International Women's Day 2022 Fundraising Event. Enjoy a local wine and deliciously generous finger food, place your bids on the
silent auction packages including vouchers and products from some of Mornington Peninsula’s most coveted.
Two landmark cases before the High Court highlight the problem of identifying whether a worker is an independent contractor or employee for tax and superannuation purposes.
The ATO released a package of new guidance material that directly targets how trusts distribute income. Many family groups will pay higher taxes as a result.
Recently we’ve seen some wild volatility in share markets across the world due to the pandemic and military conflict. We examine what’s going on, the drivers be- hind the price swings and how long they could last. Importantly, we consider what volatility could mean for your retirement savings.
With many of our business community made up of building companies, building suppliers and trades people, this is an issue bigger than ProBuild itself. The ripple effect of the demise of such a building giant will leave many of us asking the question ‘how secure is my business and my livelihood?’
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3 March // 7:30pm
Unlike other purchases, it’s not possible to return a car if you get home and decide you don’t like it.
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December saw an uptick in Covid infections worldwide. Daily case numbers in the US topped one million for the first time, underlining the ongoing challenge of the pandemic.
In this issue we discuss the changes in superannuation effective 2022, how to improve your longevity, and changes to the RBA that may affect your mortgage.
Up against over 600 nominations and 254 certified finalists, Shannon Smit, Founding Director and Financial Adviser at Mornington firm, SMART Financial Planning, won the coveted Financial Adviser of the Year Award as one of only 23 individual award winners.
In this webinar we will go through tax effective strategies that can achieve a net-benefit to your employees without costing you more.
Whilst retention payments are very common in the building and construction industry we continually see them being incorrectly accounted for, or not accounted for, and therefore often overlooked, resulting in advance payment of taxes and/or lost income.
We are heading into a period of opening up the economy after COVID, with the need to repair the budget, an election looming by May 2022, the threat of inflation and a withdrawal of central bank stimulus.
There was increasing discussion about the possibility of interest rate increases in key regions, to counteract gathering inflationary
pressures. This saw bond yields rise, and adversely affected the performance of fixed income markets.
The Victorian Government’s Business Costs Assistance Program Round Four - Construction provides one-off payments to eligible employing and non-employing businesses in the construction sector that operate in the specific local government areas.
In spite of the generally positive mood investors remained concerned by the ongoing spread of the Delta variant of Covid-19, and whether it could derail the recovery in major economies.
How safe is your superannuation? Can a super fund go bankrupt? Is my superannuation Government guaranteed?
The impact of Covid-19 and the associated lockdown has made it more important than ever to ensure, where possible, that you’re still getting paid.
While commercial property is a little more difficult to understand than residential, it offers several significant advantages for investors.
By using a guarantor to get a home loan, you can potentially put down a lower deposit. However, it doesn’t necessarily mean you will be able to borrow more money.
Even if you can’t quite afford your dream home right now, there are still other options to get onto the property ladder a lot sooner than most people think.
With the trade industry currently thriving off the boom in the housing market, tradies find themselves busier than ever. The $1200 Small Business Digital Adaptation Program can help you work out ways to make admin life easier.
If you're looking into investing into property, regardless if it's residential or commercial, there's plenty to weigh up.
Is a financial services compensation payment to your superannuation fund considered as a contribution?
New legislation will help prevent superannuation assets from being hidden during divorce proceedings. From 1 April 2022, the Australian Taxation Office (ATO) will be able to release details of an individual’s superannuation information to a family law court.
Australia’s two largest states and the ACT are in lockdown as the Delta strain of COVID-19 takes its toll while others are standing firm on a policy of eradication. The result is a country at a policy impasse and divided by border restrictions.
Falling behind on your BAS lodgements looks like an administrative problem. Left long enough, it becomes an expensive one, because the GST you collected stays payable indefinitely while the GST credits you are owed disappear after four years. Here is what that looks like in dollars.
With negative gearing now quarantined for established dwellings, new house and land has become the sensible play for investors — but there is a trap in the first eighteen months. Interest on the land is denied, while interest on the construction is not. If the bank has written one loan, someone has to do the sums. Here is why it pays to split the loan before you sign.
When the draft legislation for the trust minimum tax was released, it came with a reassurance: if you do not want to restructure, you can simply make an election instead — no restructure, and no state stamp duty. That is accurate, but it is also a very small part of the decision. Here is why you should choose your structure for the eventual sale of your business, not for the announcement.
