Tag: TAx Compliance

2019 July/August – Page 24

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TAX TAKE-AWAYS 

FOR JULY AND AUGUST

1. JULY CHANGES

Focus in on the tax changes commencing this financial year. 

In addition to the expansion of the taxable payments reporting 

regime, the new tax whistleblower legislation, and super catch-up 

contributions (we’ve previewed all of these earlier), there are other 

changes including:
SINGLE TOUCH PAYROLL
This new payroll reporting regime has now commenced for employers 

with 19 or fewer employees. Some key points to note as follows:
•  July to September is a transition period. Employers are not 

expected to be compliant until 1 October

•  No penalties will be imposed for incorrect reporting
•  For businesses with 5 or more employees, your reporting solution 

will generally be in the form of payroll software

•  Micro employers (those with 1 to 4 employees) can adopt low 

cost, simple solutions. See ATO website 

www.ato.gov.au

 then 

type “STP low cost solutions” into the search box

NO DEDUCTION FOR NON-COMPLIANT PAYMENTS
As we touched on in the previous edition of this publication, from 1 

July 2019, you can only claim deductions for payments you make to 

your workers (employees or contractors) where you have complied 

with the pay as you go (PAYG) withholding and reporting obligations 

for that payment. If the PAYG withholding rules require you to 

withhold an amount from a payment you make to a worker, you must:
•  withhold the amount from the payment before you pay it
•  report the amount to the ATO.
Any payments you make where you haven't withheld or reported the 

PAYG tax are called non-compliant payments. You won't be able to 

claim a deduction if you don't withhold any PAYG tax or report the 

PAYG tax to the ATO. If you make a mistake and withhold or report 

an incorrect amount, you will not lose your deduction. The take-out 

for employers is to ensure that your payroll processes are operating 

correctly, and that you are correctly withholding and remitting the 

required amounts from the payments that you make to employees, and 

also contractors who do not provide an ABN.    

2. REVIEW CASHFLOW AND TRADING STRUCTURE

The new financial year is typically a time where people like to review 

their cashflow and the structure through which they operate their 

business. 

CASHFLOW
The old adage that “cash is king” still rings true. Whether it be 

suppliers, the ATO, employee wages, the landlord or insurance, you 

need cash on hand at all times in order to discharge your bills.  
With many studies suggesting that the failure to plan cash flow is one 

of the leading causes of small business failure, to overcome this, it’s 

imperative to prepare with your accountant a cash flow forecast. A 

cash flow forecast tracks the sources and amounts of cash coming into 

and out of your business over a given period. It allows you to foresee 

peaks and troughs, and therefore whether you have sufficient cash 

on hand to discharge your debts at a given time. This in turn alerts 

you to when you may need to take action – by discounting stock or 

getting an overdraft for example – to make certain that your business 

has sufficient cash to meet its needs. The forecast also allows you to 

foresee when you have large cash surpluses which may indicate you 

have borrowed too much or have money that ought to be ploughed 

back into the business. 
Approach your Tax Agent and in consultation with them, prepare a 

detailed cash flow forecast.
BUSINESS STRUCTURE
When we talk about “trading structures”, we are referring to a 

decision between sole trader, partnership, trust or company. Every 

circumstance is different and the right answer will sometimes be a 

combination of more than one entity. Utilising the wrong structure 

can cost you significantly in terms of tax. It pays to seek professional 

advice to come up with a structure that suits your circumstances, and 

is scalable and effective.
Among the considerations when choosing a trading structure are:
•  Income Tax effectiveness
•  Capital Gains Tax (CGT) friendliness in the event of a future sale
•  Asset protection (both personal and for the business)
•  Estate and succession planning
•  Cost (establishment and ongoing)
• Complexity
As we enter the new financial year, talk with your Accountant about 

the suitability of your current trading structure. We note that Small 

Businesses with a turnover of less than $10 million can now, subject 

to a range of conditions, restructure without incurring CGT or income 

tax costs. 

MY TAX SAVERS

July/August 2019

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EMPLOYEES

•  Detailed listing of staff, position, 

responsibilities, current remuneration 

package, next salary review date, and 

fringe benefits provided

•  Contracts of employment
•  Copies of Industrial Awards which affect 

current staff and a list of those staff to 

whom each award applies;

•  History of workplace accidents
•  History of legal disputes with employees 

including sexual harassment, workplace 

discrimination, asbestos claims etc.

•  Details of accrued liabilities for annual 

leave, sick leave and long service leave.

STATUTORY RECORDS

•  Company Constitution
•  Company Minutes
•  Register of Members
•  Copy of ASIC Lodgements.

PREMISES

•  If the trading premises are also being 

acquired, a copy of the deed of title

•  If the trading premises are being leased, 

copies of all leases and licences to 

occupy, including bank guarantees of the 

lessee’s obligations

•  Details of any applicable searches and 

zoning certificates on the property

•  Details of any breaches or disputes with 

Government authorities pertaining to the 

property. 

FINANCE OBLIGATIONS

•  Details of any finance facilities in place 

including
•  amount borrowed, term, security, rate and 

repayments
•  Details of any assets which are the subject 

of a lease, hire purchase or similar instrument 

showing date financed, principal outstanding, 

repayment amount and approximate payout 

figure. 

INTELLECTUAL PROPERTY

•  Details of any patents (existing or 

pending) used by the business

•  Details of any licence used or granted
•  Listing of trade marks (registered or 

unregistered) owned or used under 

licence and copies of all such registrations

•  Business Name certificates
•  Listing of registered designs owned or 

used under licence 

•  Details of any copyright material owned 

or used

•  List of software licences or user 

agreements

•  List of registered domain names and proof 

of ownership from the domain registry

•  Details of any litigation, current or 

threatened, in respect to intellectual 

property.

RELATED PARTY TRANSACTION

•  Whether any arrangements (written 

or otherwise) are in force between the 

business and related parties, an estimate 

of the value of such arrangements, 

and a notification as to whether these 

arrangements are at non-commercial rates

•  Details of any related party loans which 

may be in existence.

COMPUTER SYSTEMS

•  Summary of the information technology 

platform of the business, its history, and 

planned changes

•  Management opinion as to the 

strengths and weaknesses of the current 

information technology platform

•  Information on security policies, privacy 

policies, and recovery systems.

OTHER REGULATORY ISSUES

•  Details of any authorisations or complaint 

notices which may be in force between 

the business and the ACCC

•  Copy of the business’ privacy policy 

and explanation of the steps taken by the 

business to comply with the Privacy Act.

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•  Reconciliations of income and expenses 

per the financial statements to supplies 

and acquisitions declared on Business 

Activity Statements

•  Copies of external accountant’s reports
•  Copies of internal management reports
•  Copies of projections and budgets.

TAXATION

•  Evidence that the company has no 

outstanding amounts of tax, typically 

through production of an ATO Running 

Balance Account

•  Evidence that all past returns have been 

lodged

•  Copies of fringe benefits tax returns and 

payroll tax returns for the past three years

•  Copies of any private rulings obtained, 

and relied upon, by the company

•  Details of any income tax assessments 

still under review

•  Disclosure of any past or present audits 

conducted on the business by the tax 

authorities.

DEBTORS

•  Aged listing of trade debtors as at current 

day, and at various stages over the past 

years (this is used to gain an insight 

into whether collection policies have 

strengthened or weakened over time)

•  Listing of debtors over 90 days 

with comments on the likelihood of 

recoverability 

•  History of bad debts with reasons for 

write-offs and comments on the adequacy 

of provisions for bad debts

•  Details of any debtors presently the 

subject of recovery proceedings or 

litigation

•  Copies of contracts or agreements in 

place with debtors and listing of terms of 

trade.

CREDITORS

•  Aged listing of trade creditors as at 

current day, and at various stages over 

the past years (this is used to gain an 

insight into whether cash flow difficulties 

may have been present at various times 

necessitating a slow payment of creditors)

•  Listing of creditors over 90 days with 

comments as to why they are in existence

•  History of bad or disputed creditor 

amounts with reasons

•  Details of any creditors presently 

the subject of dispute proceedings or 

litigation

•  Copies of contracts or agreements in 

place with creditors, rebate agreements 

and listing of terms of trade

•  Details of any foreign currency hedge 

contracts which may be in place.

INVENTORY

•  Listing of all stock items including 

description, quantity on hand, unit price 

and extended value

•  Supplier invoices supporting unit costs 

for major lines

•  Details of any consignment stock 

including documentation surrounding the 

arrangement;

•  Listing of slow moving or obsolescent 

stock including details of any 

provisioning policies the business might 

have in this regard

•  Listing of average gross margin 

per product line and supporting 

documentation (e.g. purchase invoice and 

sales invoice)

•  Explanation of how stock is costed 

(e.g. Purchase price, purchase price 

plus freight, purchase price plus full 

absorption costing, etc.).

FIXED ASSETS

•  Copy of Fixed Assets Register and 

copy of depreciation schedule forming 

part of the financial statements. These 

documents will sometimes be one and the 

same; where they are not, a reconciliation 

between the two is likely to be sought 

•  Reconciliation between the fixed asset 

register or depreciation schedule and the 

general ledger

•  Copies of invoices supporting the 

acquisition cost of material assets forming 

part of the fixed assets register

•  Details of any fixed assets not featuring in 

the fixed assets register, perhaps because 

they were expensed outright in an earlier 

year, are leased, or have been

•  written down to zero
•  Details as to the appropriateness of 

written down values of assets in the 

fixed assets register, and whether any 

are materially understated or overstated 

based on their wear and tear and current 

replacement values.

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Secondly, sufficient time should be allowed 

for the process to be done properly. Vendors 

typically lobby for the shortest Due Diligence 

period possible to minimise the risk of 

detection of undesirable issues and also to 

limit costs. However, if a purchaser is not 

afforded sufficient time to learn almost all 

there is to know about the business, it is 

unrealistic to expect them to acquire it. The 

message is that purchasers should devote 

ample time to the process and vendors 

should be understanding of that allowance. 

Vendors will enhance their perception in the 

eyes of the purchaser if they are seen to be 

supporting, rather than rushing, the process.
Thirdly, there is a lot more to a business than 

the contents of the financial statements and 

tax returns. Although the financial history 

of a company is extremely relevant, most 

Due Diligence processes will go far beyond 

financial analysis. The financial health and 

prospects of the business should be viewed 

as a necessary, but not the only, condition for 

purchase.

CULTURAL ISSUES

The vendor must also manage certain cultural 

issues surrounding the process, not least of 

which is the decision as to who inside the 

organisation is to be made privy to what is 

going on. It will be impractical to keep Due 

Diligence a total secret as the purchaser, 

understandably, will want to meet and 

make enquiries of a raft of key personnel 

throughout the organisation.

By the same token, vendors are 

understandably reticent to tell more people 

than what is necessary, as the mere fact 

that owners are looking at selling can be a 

disruptive and morale-destroying factor. In 

essence, a balance needs to be struck between 

those who reasonably need to be made aware 

and those who don’t. Importantly, the issue of 

who is in the know and who is not needs to be 

clearly communicated (preferably in writing) 

to the purchaser so that they do not err by 

leaking the news to the wrong person. What a 

vendor does not want to see happen is a staff 

member, particularly a senior one, finding out 

second hand of a proposed transaction.
A further cultural issue surrounds the 

inevitable uncertainties that staff members 

will have about their own tenure once they 

discover a change of ownership is in the 

wings. In some cases the purchaser will take 

over the existing staff list, assuming leave 

liabilities in the process. In other cases, 

they will not. If it has been made clear by 

the purchaser that they will not be wielding 

the axe, then the vendor should take every 

possible step to allay the fears of staff. The 

better the frame of mind which staff members 

are in, the more likely they are to provide 

truthful and enthusiastic information to 

the purchaser making enquiries of them. A 

cynical staff member who is resentful of a 

change of hands and fears for their future, 

could be damaging to the process and, in 

some cases, fatal to the cause.

ITEMS TYPICALLY SOUGHT 

An important thing to understand about Due 

Diligence is that every process is different. 

The size of the transaction, the nature of what 

is being purchased (e.g. an asset, a business, 

a company, a group of companies), the size of 

the purchaser and vendor, the history between 

the purchaser and vendor and the degree 

of government regulation surrounding the 

transaction all play a role in determining the 

scale, scope and duration of the Due Diligence 

process. Despite Due Diligence being a varied 

process, the following sample Due Diligence 

checklist for the acquisition of a business will 

provide a useful insight into the extent of a 

purchaser’s requirements.

FINANCIAL RECORDS

•  Copies of financial statements for the past 

three financial years

•  Copies of income tax returns for the past 

three financial years Reconciliations to 

show how source accounting data from 

the vendor’s system was evolved into the 

financial statements

•  Reconciliations to show how the profit 

or loss in the financial statements was 

evolved into the taxable income per the 

income tax return

•  Copies of Business Activity Statements 

for the past three financial years

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DUE 

DILIGENCE

Due Diligence is an integral step in the purchase and sale of businesses and, for that 
matter, the completion of any transaction of substantial value. The Due Diligence 
process can be an exceptionally tense period for both vendor and purchaser. For the 
vendor, the Due Diligence is often the last hurdle that must be crossed in order for 
a proposed sale transaction to proceed. For the purchaser, the Due Diligence is the 
last frontier before committing serious sums of money to a decision. In this article, 
we examine the Due Diligence process and provide an indication to purchasers and 
vendors alike of the sorts of issues likely to be covered in the Due Diligence process.

WHAT? 

Due Diligence can be defined as the process 

of systematically evaluating information, to 

identify risks and issues relating to a proposed 

transaction. Due Diligence is carried out by a 

purchaser, usual with the close co-operation 

of a vendor. One way of thinking about Due 

Diligence is to view it as the last stage in 

the buying process. It is the time when a 

purchaser will typically have access to all 

of the company’s books, records and files. 

There will normally be a pre -determined 

Due Diligence period in which to investigate 

information to ensure that it is true and 

accurate.

THE PROCESS

Due Diligence is normally an exhaustive 

research process that purchasers undertake 

when trying to determine whether, at what 

valuation, and under what terms to invest 

in a company or business. A Due Diligence 

process can last as little as a few weeks and as 

long as several months. 
During Due Diligence, purchasers may 

ask for financial statements, budgets, legal 

documents, operations schedules and plans, 

sales and marketing materials, and request 

to have meetings with the vendor’s board, 

management team, and staff members. They 

may ask to speak to existing and former 

clients, vendors and investors. In essence, 

anything is fair game and, more often 

than not, vendors are baring their soul in 

every respect. For this reason, legally tight 

confidentiality agreements are an important, 

if not failsafe, mechanism to put in place.
There is little doubt that the more open the 

communication channels, the more likely a 

Due Diligence process is to run smoothly. 

Vendors can help the process by being 

organised, responsive and honest and by 

asking the purchaser for a prioritised list 

of Due Diligence items in advance of the 

commencement of the process. 
Purchasers, and their representatives, will 

work through a long and sometimes unwieldy 

Due Diligence checklist and will normally 

require staff of the vendor to be at their 

beck and call to gather documentation and 

put together Work papers. The vendor’s 

accountant will also be a key person in the 

provision of information and in addressing 

the many questions that flow from the Due 

Diligence process. Once the Due Diligence 

process is complete, a shortlist of issues will 

typically arise which will need to be worked 

through between the parties and, depending 

on their nature, may give rise to an adjustment 

in the proposed transaction amount, or an 

adjustment to what is and isn’t being provided 

as part of the transaction. Where stock and 

fixed assets are being acquired, it is also 

customary for a stocktake and fixed assets 

inventory to take place. These are among the 

final steps in the process and sometimes will 

not be performed until all other issues have 

been agreed upon.

CRITICAL ISSUES

Hundreds of issues comprise a typical Due 

Diligence, however, at a broader level, three 

critical issues should be noted. 
Firstly, as alluded to in the previous section, 

preparation is the key. A purchaser must 

have their thoughts in order before the Due 

Diligence process begins and should start the 

Due Diligence preparation and information 

gathering from the moment they decide 

they are interested in a particular business. 

A vendor needs to pre-empt the purchaser’s 

requirements and do their best to have 

everything in readiness.
A purchaser should begin by compiling the 

following: 
•  A detailed listing of the exact Due 

Diligence steps to follow

•  A checklist of everything to complete in 

each Due Diligence area 

•  Specific Due Diligence tasks that need to 

be completed

•  All of the materials needed from the 

vendor before commencement.

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TAX SAVINGS 
Tom is a 68-year old former engineer who retired in January 

2019. He spends his days tending to his garden, and playing golf 

at his local course where he also does some unpaid work in the 

pro-shop. He has a range of passive investments which take his 

taxable income to $110,000 per year. He recently sold a bundle 

of bank shares for $290,000. 
Under the current rules, Tom could not contribute the sale 

proceeds to superannuation as he is 68 and does not work 

the required 40 hours over a 30 day period (unremunerated, 

volunteer work does not count). The $290,000 would therefore 

be trapped outside of superannuation, unless Tom returned to 

the workforce and met the work test by age 75.
Under the Government’s new law, however, without having 

to meet the work test, Tom would be permitted to invest the 

proceeds inside superannuation. Assume those proceeds earned 

9.4% per annum (the median growth investment option for super 

funds in 2017-18). The tax payable on those earnings would be 

$4,089 ($27,260 x 15%). If Tom’s account was in pension mode, 

the earnings would be tax free.
Under the old law, with the proceeds outside 

superannuation,assume Tom found an equally attractive 

investment vehicle with the same rate of return. He would pay 

$10,631 in tax per year ($27,260 earnings x 39% personal tax 

rate, including Medicare levy). Thus, under the new law, Tom 

would more than $6,500 better off per year (or $10,631 if his 

account is in pension mode). 

The ability to carry forward the unused portion of superannuation 

concessional contribution cap may come in particularly handy for: 
•  Those who are returning to the workforce, such as parents who 

have taken time out to look after new-born children

•  Those whose income has increased from prior years, such as 

individuals who now work full-time or who have been promoted

•  Those who have received a one-off windfall gain. 
SALARY SACRIFICE
One of the main forms of concessional contributions that an employee 

could utilise for a catch-up contribution is salary sacrifice. 
The following steps are involved in salary sacrificing to 

superannuation.

1. The employee and the employer enter into a written salary sacrifice 

agreement, setting out the name of each party, the commencement 

date of the arrangement (it cannot be backdated), the amount to 

be sacrificed each pay period etc.

2. Each pay period, the employer pays the nominated sacrificed 

amount directly to the employee’s superannuation fund. No tax 

is withheld from this amount, and the employee must have no 

access to this amount.   

Because the amount sacrificed is not subject to income tax, employees 

will improve their overall tax position by implementing a salary 

sacrifice strategy. 
AFTER TAX
If your employer does not offer salary sacrifice, or you do not wish 

to be locked into a salary sacrifice agreement, the other main form 

of concessional catch-up contribution you could make is an after-tax 

contribution that you can claim as a deduction 

(see page 15). 
Having met the conditions, you can claim the full amount of the 

contribution (up to the concessional contribution caps – see later) in 

your personal tax return at Label D12.

The suspension of the work test, will enable taxpayers aged 65 to 75 

who are no longer working, or only working a few hours per week, 

to contribute to superannuation and enjoy the tax concessions that it 

provides.

RELAXATION OF THE WORK TEST

Treasury Laws Amendment (Work Test Exemption) Regulations 

2018 (the Regulations) was registered on 7 December 2018. It 

provides a one-year exemption from the work test for superannuation 

contributions to allow recent retirees to boost their superannuation 

balances. Currently, individuals aged 65 to 74 years must work 

a minimum number of hours during a particular period in the 

financial year in order to keep making voluntary contributions 

to superannuation (known as the work test). From 1 July 2019, 

individuals aged 65 to 74 years with total superannuation balances 

below $300,000 can make voluntary contributions to superannuation 

for 12 months from the end of the financial year in which they last met 

the work test. 

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From 1 July, two first-time superannuation opportunities present 
themselves. The first allows older, retired Australians to potentially 
make additional contributions to super, while the second may allow 
additional after-tax and salary sacrifice contributions to be made 
during this financial year. 

CATCH-UP CONTRIBUTIONS 

From 1 July 2018, if you have a total super balance of less than 

$500,000 on the previous 30 June and you make or receive  

concessional contributions of less than the concessional contributions 

cap of $25,000 pa, you may be able to accrue unused amounts for use 

in subsequent financial years.
2018/2019 is the first financial year you can carry forward unused cap 

amounts and these amounts can be used from 1 July 2019. Unused cap 

amounts can be carried forward for up to five years.
Before this change to the law, the concessional operated on a year-by-

year basis – any unused amounts from a previous year could not be 

carried forward and used in subsequent years. You either used it, or 

you would lose it! Practically speaking, the first year that you can take 

advantage of this reform is 2019/2020 (for any unused 2018/2019 cap).

EXAMPLE – Carry-Forward Concessional Cap
Catelyn is a lawyer who earns $95, 000. As a result her employer 

would normally contribute $9, 025 in Superannuation Guarantee 

on her behalf. From 1 July 2018, she was on unpaid Maternity 

Leave, and returned to work exactly 12 months later. 
Under the old rules, unable to carry-forward her unused 

concessional caps from previous years, in 2019/2020, Catelyn’s 

concessional cap would be $25 000 and not take into account her 

unused 2018/2019 cap. 
Assuming she made no contribution while on Maternity Leave, 

under the new rules Catelyn would be able to make a personal 

contribution of up to $40 975 in 2019/2020 (the unused $25 

000 cap + $15 975 of the unused 2019/2020 cap, taking into 

account the $9 025 in Superannuation Guarantee paid by her 

employer). This would give her extra capacity to catch-up on her 

superannuation contributions that were not made during her time 

off work – either by salary sacrificing, or making an after-tax 

contribution for which she could claim a tax deduction. The 

maximum amount of the tax deduction allowed in 2019/2020 

would also increase by $25 000 (being the unused cap amount 

from the previous year). 

FIRST-TIME

  

SUPER 

OPPORTUNITIES 

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unless the amount is repaid or made subject 

to a complying Division 7A loan agreement 

(with minimum interest and principal 

repayments) before the company’s lodgement 

day for its 2018/2019 tax return. Thus, before 

you lodge your company’s return (or before it 

is due) you will need to assess whether a loan 

has been indeed been made and, if so, how 

you wish to deal with that loan. 
UNPAID PRESENT  

ENTITLEMENT (UPE)
Where a private company and a discretionary 

trust are in the same group of entities and 

the private company is an unpaid presently 

entitled income beneficiary of the trust in 

2018/2019, you will need to consider how to 

deal with this amount. Division 7A may apply 

to these unpaid present entitlements unless:

»

The present entitlement has been paid out 

by the lodgement day of the 2018/2019 

tax return

»

The funds are held on sub-trust by the 

lodgement day of the 2018/2019 tax return, 

or

»

A complying Division 7A loan agreement 

is entered into by the lodgement day of the 

2018/2019 tax return. 

Therefore, whatever course you choose, if 

you fail to take action by the lodgement day 

for the company’s 2018/2019 tax return, then 

pursuant to Division 7A the company will be 

deemed to have paid an unfranked dividend 

to the trust. This can be a complex area, and 

accordingly advice should be sought from 

your Accountant. 

TAX AGENT

If, like many taxpayers, you use the services 

of a Tax Agent to prepare your personal 

Income Tax Return you should ensure you are 

on their lodgement list by 31 October 2019. If 

you are not on a Tax Agent’s Lodgement List, 

your tax return will be due on this date, and 

you will not enjoy the extended due date that 

you usually would when you lodge with a Tax 

Agent. Other points to be mindful of when 

using a Tax Agent include:
•  Ensure they are registered with the Tax 

Practitioners Board (go to 

//www.tpb.gov.au/search-register) 

•  Ensuring that you provide the Tax Agent 

with all of your relevant tax records for 

2018/2019 (receipts etc.). Failure to do 

may result in delays in lodging your 

return, and you possibly paying more 

tax than you are liable for. Ask your Tax 

Agent for a checklist of the records that 

you need to provide. 

•  Tax return preparation fees are tax 

deductible, so ensure that you retain 

evidence of your payment. 

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2019 July/August – Page 16

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Post 30 June 

Tax considerations

While the arrival of 1 July means that your tax position for 
2018/2019 is largely now determined, there are significant 
matters that still must be attended to post-30 June which will 
impact your overall tax position for that year. 

SUPERANNUATION DEDUCTIONS

If you made a superannuation contribution 

in 2018/2019 for which you can claim a 

deduction, then you will need to complete 

paperwork to ensure its deductibility.
To be eligible to claim a deduction for 

contributions made to superannuation, the 

contribution must be made between 1 July 

2018 and 30 June 2019. In terms of timing:
•  A contribution in cash is made when 

received by the fund 

•  A contribution by electronic funds 

transfer is made when the amount is 

credited to the superannuation fund’s 

bank account – this may occur some time 

after you have done what is necessary to 

effect the payment, and

•  A contribution by cheque is made when 

the cheque is received by the fund unless 

it is dishonoured. 

Most individuals up to age 75 can claim an 

income tax deduction for personal after-

tax superannuation contributions. Up until 

recently, you could only claim a deduction 

for your personal contributions where less 

than 10% of your assessable income, your 

reportable fringe benefits and your reportable 

employer superannuation contributions (e.g. 

salary sacrifice contributions), for the year 

were from being an employee – this was 

known as the ‘10% Rule’. This rule prevented 

most employees from claiming a tax 

deduction for this type of contribution. This 

rule no longer exists. 
With the scrapping of the 10% Rule, to claim 

a deduction only the following conditions 

need to be satisfied:
•  Age – All individuals under the age of 

65 are eligible. Those aged 65 to 74 who 

meet the superannuation ‘work test’ 

(work for at least 40 hours in a period of 

not more than 30 consecutive days in the 

financial year in which you plan to make 

the contribution). For those aged 75, the 

contribution must be made no later than 

28 days after the end of the month in 

which you turn 75. Older taxpayers are 

ineligible. 

•  Minors – If the individual is under 18 

at the end of the income year in which 

the contribution is made, they must 

derive income in that year from being an 

employee or carrying on a business. 

•  Complying Fund – The contribution 

must be made to a complying 

superannuation fund. 

A deduction is only allowable however if 

you have given a notice to the trustee of your 

superannuation fund or to the Retirement 

Savings Account (RSA) provider stating your 

intention to claim a deduction for the whole or 

part of a contribution covered by the notice, 

and an acknowledgement of that notice has 

been received. In practical terms, this requires 

you to complete a Notice of intent to claim or 

vary a deduction for personal superannuation 

contributions and then send it to your 

superannuation fund or RSA. Copies of this 

notice are available on the ATO website. The 

notice must be given by the earlier of:
•  The day you lodge your 2018/2019 per-

sonal tax return, and

•  The end of the financial year following 

the year in which the contributions are 

made (i.e. 30 June 2020). 

TAKING MONEY FROM YOUR 

PRIVATE COMPANY

Where you operate a private company the 

following time-sensitive actions must be 

considered following 30 June 2019:
LOANS
Where the company has made a “loan” (this 

has a broad definition) or payment that is 

not a legitimate dividend during 2018/2019 

to a shareholder or an associate (e.g. spouse) 

a deemed dividend may arise in 2018/2019 

MY TAX SAVERS

July/August 2019

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2019 July/August – Page 15

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TREASURY EXAMPLE – AN 

ASSOCIATE OF THE ENTITY
Lyn is an employee of Company A. 

Company A is an associate of Company 

B because Company A is reasonably 

expected to act in accordance with the 

wishes of Company B. Company A is 

not involved in the day-to-day running 

of Company B, the companies lodge 

separate tax returns and have separate 

auditors. Lyn becomes aware that 

Company B is not correctly reporting its 

sales income, in breach of the taxation 

laws. Lyn discloses this information to a 

member of Company A’s audit team. 
Lyn is eligible for protection in respect of 

this disclosure. 

CONFIDENTIALITY 

Disclosure to the Commissioner or an eligible 

recipient (including, as per earlier, tax 

practitioners) can be made anonymously. In 

cases where the whistleblower’s identity is 

known by the recipient, it is an offence for a 

person to disclose an eligible whistleblower’s 

identity or information that is likely to lead 

to the identification of the whistleblower. 

This is designed to protect eligible 

whistleblowers from victimisation, career 

damage, or other harm as a result of making 

a protected disclosure, and is common to 

most whistleblower regimes. Breaches of this 

confidentiality requirement can result in six 

month’s imprisonment and/or fines of up to 

$200,000 for an individual or $1 million for a 

corporation. 
As stated, tax practitioners and auditors are 

among the listed recipients. Therefore, they 

may receive information from eligible tax 

whistleblowers in respect of your clients 

(e.g. from their employees, contractors etc.). 

Where this is the case, the tendency may be 

to pass on that information to your client. 

However, doing so would expose yourself 

or your practice to criminal liability – large 

fines and/or imprisonment for revealing the 

identity of the tax whistleblower, see earlier 

– under the new regime. Therefore, to avoid 

breaches, it’s recommended that internal 

procedures for your employees be put in 

place within your practice in the event that 

qualifying disclosures are made by eligible 

whistleblowers (acknowledging that most 

disclosures will be made to the ATO).
Importantly, even where eligible disclosures 

are made to tax practitioners, they are under 

no obligation to refer the matter to the ATO. 

As a recipient, the extent of their obligations is 

to protect the identity of the tax whistleblower 

who provided them with the information.  

Whilst there are identification protections 

built into the legislation, in some cases it 

may be obvious to clients who has disclosed 

the information. For example, as their tax 

practitioner you may be the only person privy 

to certain financial aspects of the client’s 

affairs. To this end, the protections under the 

legislation prohibit any form of victimisation. 

That is, it is an offence for a person to 

victimise a whistleblower or another person 

by engaging in conduct that causes detriment, 

where the conduct is based on a belief or 

suspicion a person has made, may have made, 

proposes to make or could make a disclosure 

that qualifies for protection. Detriment is 

defined very broadly and includes:
•  dismissal of an employee
•  injury of an employee in his or her 

employment

•  alteration of an employee’s position or 

duties to his or her disadvantage 

•  discrimination between an employee and 

other employees of the same employer

•  harassment or intimidation of a person
•  harm or injury to a person, including 

psychological harm

•  damage to a person’s property 
•  damage to a person’s reputation 
•  damage to a person’s business or financial 

position; and 

•  any other damage to a person.

PROTECTION

The scope of the protection afforded to a tax 

whistleblower is comprehensive. The new law 

ensures that eligible whistleblowers are not 

subject to any civil, criminal or administrative 

liability (including disciplinary action) for 

making the disclosure, and that no contractual 

or other remedy may be enforced against 

them on the basis of the disclosure. In the 

tax practitioner context, should you make 

an eligible disclosure to the ATO in respect 

of a client or former client, this would mean 

immunity from:

•  Fines or other sanctions imposed by the 

Tax Practitioners Board for breaching the 

Code of Professional Conduct in respect 

of: 

»

Code item 6 – duty of confidentiality

»

Code item 4 – act in the best interests of 

your client

•  Penalties contained in the Privacy Act
•  Any civil action taken by your clients, 

such as for breach of a fiduciary duty 

owing to the client 

•  Any contractual, common law action such 

as for breach of contract pursuant to your 

Engagement Letter. 

The new law therefore provides a ‘use 

immunity’ for individuals (including tax 

practitioners) by preventing potentially 

incriminating information that is part of a 

disclosure from being admissible as evidence 

against you in civil or criminal proceedings 

for the imposition of a penalty. 

OBSERVATIONS

•  The legislation commences 1 July 2019
•  You are now free to make anonymous 

disclosures relating to tax affairs and are 

somewhat protected from any detriment 

that may flow from that

•  Tax practitioners may be a recipient of a 

disclosure. Ensure  that employees and 

senior staff in your practice are aware 

of the whistleblower confidentiality 

requirements

•  While the regime offers some welcome 

protection to tax payers and tax 

practitioners who are contemplating 

making disclosures, we would urge 

caution before making a disclosure. You 

need to carefully weigh any potential 

consequences, and indeed whether your 

particular disclosure is covered by the 

new regime. Even with protections from 

victimisation, there could nonetheless 

be some unpleasantness involved in 

disclosing if it is obvious that you were 

the person who disclosed.

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