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Showing posts from March, 2018

Corey Beat CTA on 'Swimming between the flags for professional service entities'

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In recent years, the Australian Taxation Office has taken a 'swim between the flags' approach in respect of their guidance and advice to taxpayers. 1

This approach involves the ATO publishing its views in respect of relative levels of tax compliance risk across a spectrum of behaviours or arrangements, and indicating that the ATO will not allocate active compliance resources to behaviours or arrangements they consider to be low risk. The benefit of this approach is that taxpayers who 'swim between the flags' can supposedly conduct their affairs with additional certainty and potentially receive the benefit of savings in compliance costs. 

But what happens when the ATO picks up its flags and leaves the beach?

Where does this all leave taxpayers in professional practice industries and their advisers? 


In his paper, 'Swimming between the flags for professional service entities', presented at the Professional Services Day in Perth in March 2018, RSM Bird Cameron's …

Unpacking the company tax excess imputation credits saga

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written by Robert Deutsch CTA *


There are two different models of how company tax and its interface with the individual shareholder's tax position works. Understanding the difference is crucial if you are to follow the current debate regarding refunds of excess imputation credits.

The way it all works can be described in one of two ways and the difference really does matter:

The Full Imputation Model or the ‘company tax as a mere withholding tax’ model, orThe Partial Imputation Model or the ‘company tax as a quasi-final payment’ model.
Personally, I prefer the descriptors referencing the company tax as they are more informative as to what it is all about.

1. Company tax as a mere withholding tax model This model operates on the premise that all pre-tax company profit distributed to shareholders should be taxed overall at the rate applicable to the shareholder who ultimately receives the dividend. Thus, if pre-company tax profit of $1,000 ends up in the hands of a zero rate taxpayer,…

Reducing Australia's corporate tax rate — the unconvincing case for 25%

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The proposal announced by the Treasurer in the May 2016 Budget for a gradual reduction of Australia’s corporate tax rate—the Ten Year Enterprise Tax Plan 1 — became one of the major points of difference between Australia’s major political parties in the July 2016 election and has remained an obvious point of difference since then. 

This was not the first time that the corporate tax rate had featured in Australian political debate, but it was a key distinction between the parties, with both the ALP and Greens promising that, if elected, they would not proceed with the proposed gradual reduction of the rate to 25% by 2026 for all companies.

An article, 'The unconvincing case for 25%' by Professor Graeme Cooper CTA (excerpted here from the first edition of Australian Tax Forum for 2018), examines the cogency of the arguments which underpinned the Budget proposal and the government’s election policy. It does not directly address the difficult normative question, should Australia’s c…

Michael Cox on navigating the digital landscape

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Greenwoods & Herbert Smith Freehills' Chief Operating Officer, Michael Cox, presented at The Tax Institute’s 2017 SME Symposium on ‘Navigating the digital landscape – a plan for today’s tax professional'.

Here he speaks about the steps tax practitioners can take to address digital disruption in their profession, the technologies needed to operate an evolving tax practice, and why technology is so important in today’s business world.
What steps can tax professionals take to navigate the new landscape?
“Undoubtedly, there's lots of technology out there. There are three steps that I'd call out in the tax space and number one is the Australian Tax Office. They're going through huge transformation. In the next 12, 18 months, I think we'll see every form of communication and interaction through a digital means. The second one is automation. I can see us starting to replace some of those activities that we've offshored, some of those low value-adding activities,…

Our three strategic pillars

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written by Vince Lendrum *


Tracey Rens, in her President’s report for March, shared our vision for the future of the tax profession and The Tax Institute’s determination to play an important role in shaping that future.

In this month’s CEO’s Report, I will focus on what this means for the evolving needs of our current and future members, and how The Tax Institute will continue to adapt its services to meet these needs.

The first practical implication of the Institute’s new vision and strategy is that they provide clarity around what we do and why we do it. Specifically, The Tax Institute is “committed to representing our members, shaping the future of the tax profession and continuous improvement of the tax system for all”. There is equal clarity around the three pillars of how we do this — “through the advancement of knowledge, support of members and advocacy”.

I will explore what this may look like in three key areas:

1.support of members
2.advancement of knowledge
3.advocacy.

1. Sup…

The 2018-19 federal election – the emerging tax battleground

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written by Robert Deutsch CTA *


Labor's recent announcement that, if elected it will move to eliminate refunds of excess imputation credits with effect from 1 July 2019, adds yet another layer to the differentiation between the Coalition and Labor on tax policy.

The next federal election is looming as one of the most important elections in recent times, particularly having regard to the differences between the two alternatives on tax policy.

The Coalition supports the following:

A reduced corporate tax rate for all companies, eventually with a target rate of 25%A likely reduction in personal tax rates, particularly for income levels up to $100,000 (the exact details are unknown, but should become clearer after the 8 May budget)Apart from the already announced increase to the Medicare levy to 2.5%, no further change in current arrangementsNo change to current arrangements regarding negative gearing of investment propertyNo change to the capital gains tax (CGT) discount, which curren…

Our partnership with ebroker – an interview with Professor Bob Deutsch CTA

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ebroker has joined the growing list of The Tax Institute’s business partners.
The Institute endeavours to build a suite of professional business partners that provide our members with access to relevant products and services and, where possible, exclusive benefits.
ebroker is Australia’s leading online business finance broker. It aggregates non-bank business lenders into a platform that simplifies the task of finding the right small business loan for any funding requirement.
ebroker recently sat down with the Institute’s own Professor Bob Deutsch CTA to discuss some of the tax implications for business owners looking to take out an unsecured business loan.


In this short video Bob discusses the role of an accountant in advising clients who seek business finance from a non-bank business lender, some of the tax implications that arise from taking small business loans from a non-bank business lender, and ponders the impact the application of AI on the tax and accounting landscape in Aust…

Reigniting the question of 'carrying on a business' & the potentially wasteful imputation system – 2018 Barossa Convention

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The question of when an entity is 'carrying on a business' remains something of a maze.

Last September, the Government released the Treasury Laws Amendment (Enterprise Tax Plan Base Rate Entities) Bill 2017 exposure draft for consultation. The intended purpose was to see only companies deriving income actively, and not passively, able to access the lower company tax rate of 27.5%.

Neither the draft nor associated explanatory memorandum discussed what it means when a company is carrying on a business.

In October, the bill was tabled in parliament, with the ‘carrying on a business’ requirement removed from the ‘base rate entity’ definition altogether and replaced with a ‘bright line’ test that puts a ceiling on the amount of passive income a company can derive before it can access the lower corporate tax rate.

Case law and recently-released material from the Australian Taxation Office means an entity may or may not be carrying on a business. Further, the changes to the company …

Shaping our tax profession of tomorrow

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written by Tracey Rens *


In 2018, The Tax Institute celebrates its 75th anniversary.

Since the Institute’s establishment in 1943, Australia’s tax system has changed dramatically and we have evolved to meet the growing needs of the profession.

For 75 years, we have advocated for a better tax system, helped people connect, shared knowledge, educated young tax professionals and built a vibrant membership.

We are now Australia’s leading educator and professional association in tax, with over 12,000 members. The Institute’s Chartered Tax Adviser (CTA) designation has also become the tax profession’s premier credential.

This, however, doesn’t mean we can be complacent. The Tax Institute and the tax profession need to prepare for the future by embracing change, disruption, innovation and a broader perspective. We need to actively shape the tax profession of tomorrow.

Our vision Towards the end of 2017, the Institute undertook a strategic review, which established the following vision statemen…

Company tax cuts – where might the money go?

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written by Robert Deutsch CTA *

The continuing saga regarding corporate tax reductions in Australia seems to have boiled down, at least in a political sense, to just one fundamental question – will a corporate tax reduction give rise to increased wages for workers?

In responding to this question, it is worth remembering that a company either distributes its after-tax profits to its shareholders or uses it in its business. There is nowhere else for the money to go. Distributed income goes to either resident or foreign shareholders and the rest is applied by the directors of the company in what is thought to be the best use of the available funds.

Thus, if we take the case of a company which earns taxable income of a $100m and pays corporate tax of $30m on that taxable income, the remaining $70m could be:

distributed to its resident shareholdersdistributed to its foreign shareholdersreinvested in hard assets, orpaid to employees in the form of wages. 
In relation to the distributed profi…

Andrew Noolan CTA on 'The future of Division 7A'

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In a paper presented at last November’s SME Symposium in Sydney, Andrew Noolan CTA looked at some of the issues he and many other practitioners have experienced over the years in relation to Division 7A.

He also covered the developments for 2017.

Andrew is a partner in the Sydney law firm, Brown Wright Stein Lawyers. His clients are accountants and lawyers in public practice who require advice on tax issues that impact their clients. He specialises in tax issues common to the SME and high-wealth-individual sectors.
In the paper, excerpted below, Andrew speculates on what action advisers might need to take in anticipation of the July 2018 changes.
The future of Division 7A In the 2016 Federal Budget papers, Government set out that there would be changes to Division 7A that will apply from 1 July 2018. The purpose of discussing them here is to speculate on how the changes might alter the way that Division 7A needs to be dealt with, and, in one case, to identify what action might need to be t…

The old chestnut – principle-based drafting vs detailed black letter law

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written by Robert Deutsch CTA *

I often ponder whatever happened to principle-based drafting, a concept we heard about some 15 years ago and which was meant to be the prevailing mantra in the development of tax legislation.

However, reality has turned out to be much different, such that the legislation these days is developed with often very little said about the principles that underpin the legislation, but instead an elaboration of detailed rules essentially covering the minutiae of almost every aspect of the law.

Two classic examples of this modern trend are the current formulation of the capital gains tax (CGT) rules and the fringe benefits tax (FBT) rules. Capital gains tax covers some 400 plus pages of detailed legislation while the FBT has a more modest, but still formidable, 250-plus pages of detailed legislation (excluding the Regulations).

One cannot help but wonder if all this is necessary. The views of our members in this context are very much welcomed.

Would it not be mor…

HSBC extends preferential banking offers to Institute members

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HSBC, a Principal Sponsor of The Tax Institute’s 2018 National Convention, is proud to reach its 12th consecutive year of partnering with the Institute. To celebrate, HSBC has enhanced its wide range of preferential banking offers and benefits to Institute members.
Over the past dozen years, The Tax Institute has participated in HSBC’s Corporate Partner Program, which includes more than 100 major companies and affiliate organisations, including KPMG, Deloitte, Optus, IBM and Telstra, to name just a few.

In fact, the Institute ranks seventh in HSBC’s overall Corporate Partner portfolio, which demonstrates the strength of the alliance, our history of working together, and the popularity of the program’s offers among our members.

The partnership has meant that HSBC works closely with the Institute to support our professional development events and enhance our ability to deliver products and services, as well as provide tangible benefits to members.

Institute member benefits  You, as a m…