Summer 2010 Newsletter
Office Closure for Christmas/New Year
We thank you for providing us with the opportunity to assist you during this year and we look forward to continuing to assist you to grow and prosper during the New Year.
Please note that our office will be closed from 24 December 2010 and will re-open on Monday 10 January 2011 with some of our staff taking an additional week (returning 17 January).
Having trouble paying your tax debt?
The ATO offers payment arrangements for most businesses if you have difficulties paying your tax or activity statement debt.
If you are a small business (ie, turnover less than $2 million), then you may be eligible for a 12 month interest free payment arrangement from the Australian Taxation Office (for arrangements entered into prior to 30 June 2011).
In order to receive a payment arrangement, you must meet the following conditions:
You must have no outstanding ATO lodgements (ie, Tax Return, BAS, IAS) and all future lodgements and payments must be made by due dates
Payments must be made by the agreed date. (Note for small business GIC free arrangements, a direct debit authority will need to be completed).
Please note, the ATO are cracking down on payment arrangements and if you default under the arrangement, you may not be granted an additional payment arrangement and the ATO may commence debt collection proceedings.
If you are having trouble paying your tax or if you have an existing payment arrangement with the ATO, and are having trouble meeting the terms, please contact us as soon as possible so we can liaise with the ATO on your behalf.
Declaring or Paying Dividends?
Paying dividends is a normal part of company life; generate the profits, pay the tax and then look at what dividends are available for the shareholders. Changes in the Corporations Act earlier this year mean that directors need to consider a new set of rules before they declare or pay a dividend. Section 254T of the Corporations Act provides the rules governing dividends.
In the past, directors needed to ensure that dividends were paid out of profits. This has now changed. With effect from 28 June 2010, section 254T has been amended and replaces the profit test with three new tests.
These new tests are:
The company’s assets exceed it's liabilities immediately before the dividend is declared and the excess is sufficient for payment of the dividend; and
The payment of the dividend is fair and reasonable to the company’s shareholders as a whole; and
The payment of the dividend does not materially prejudice the company’s ability to pay its creditors.
As a director you need to consider and satisfy these issues at the time when a dividend is declared and also when the dividend is paid. At this stage you might be thinking does this really have any practical effect on us? And, in many cases the answer might be no. Certainly as a director, when your company declares or pays a dividend, you are subject to the requirements of the Corporations Act. Get it wrong and you may be explaining your actions to ASIC.
Think about what might happen if your company ever got into financial problems and a liquidator was appointed. Then, the liquidator might be interested in identifying any circumstances where the directors had breached their responsibilities. If this occurred you could expose yourself to personal liability. Where tested, the onus would be on the directors to prove that they had met the tests imposed.
Dividends are a normal part of company life. They may be a part of the way you return value to yourself from your company. They may also be used to manage fringe benefits provided by the company, shareholder loan accounts or as an alternative to more traditional forms of remuneration. This will continue. You simply need to be sure at the time when dividends are declared and paid that you satisfy the new tests imposed by the Corporations Act. You also need to be mindful of what your company constitution provides. It may have additional requirements. Where this is the case you will also need to meet these.
Workers Compensation Claims - Dust Diseases!
Many businesses may think that this may not affect them, but it can! Dust diseases such as asbestos exposure can take up to 40 years for symptoms to display and there is no limitation period on a claim. You don't have to manufacture asbestos products for this to be an issue, you could have had a contractor come and repair an asbestos roof on site and can potentially be liable.
It is important for businesses to keep appropriate records to ensure if a claim does come up, you have all the information you need.
What should you do -
- Realise that claims can be made by persons employed or working on your site 20, 30 or 40 years ago and that your business will be held financially responsible if you can't find insurance.
- Realise that even if your business or company has changed names or hands it still might be found liable. Arrange for an employee list to be maintained with names, addresses, phone numbers and their position held.
- Talk to your current employees and find out as much information from them as possible.
- Keep records of insurance (old and new) and retain copies of policies.
- Maintain a register of workers' compensation, contractors' liability and public liability insurers.
- Don't rely on your broker - the broker may no longer be in existence. If you don't know who your insurer was in the past, start making enquiries now with your present insurer. They sometimes have details of previous policies.
- Most importantly - don't destroy documents. Retain them - scan them - put them on your database - and let others in management know where they are.
Installation by 31 December 2010
If you are an eligible small business (turnover under $2M) and you ordered an eligible asset for investment allowance purposes prior to 31 December 2009, you can claim the 50% investment allowance if you install the eligible asset by 31 December 2010. The investment allowance claim would be made in the 2010/11 tax return.
If your turnover is over $2M
If you ordered an eligible asset prior to 31 December 2009 and your turnover is over $2M per annum, you can claim 10% investment allowance if you install the eligible asset by 31 December 2010. The investment allowance claim would be made in the 2010/11 tax return.
ATO Letters issuing to Trustees of closely held Trusts
As part of the transitional arrangements for tax file number (TFN) reporting, the ATO are matching beneficiary details in the 2010 trust tax returns against their records as they have noticed a large number of returns lodged by tax agents with incorrect or missing beneficiary details.
The ATO will soon issue a first round of letters to trustees of closely held trusts who have lodged their 2010 trust tax return and:
- the beneficiary's TFN or other details such as name, address and date of birth could not be matched to our records;
- the trustee did not include a beneficiary's TFN in the 2010 trust tax return.
They will continue to send more of these letters to trustees as 2010 trust tax returns are lodged and they find incorrect or missing beneficiary information.
Why are the ATO issuing these letters?
Correct TFN and beneficiary details must be reported to the ATO under the new TFN withholding rules for closely held trusts.
Trustees can meet their TFN reporting obligations for the 2011 income year by lodging their 2010 trust tax return and fully completing the beneficiary details (name, address, TFN and date of birth, for individuals) in the statement of distribution.
If the withholding rules apply and a beneficiary has not provided all their details before the trustee makes a payment to them, the trustee must withhold from the payment at the top marginal tax rate, plus Medicare levy - that is 46.5% in the 2010-11 income year.
The ATO letters will be sent to our postal address on your behalf and will explain which of our clients' beneficiary details are incorrect or missing.
Should we receive any of these letters on your behalf, we will contact you to verify our records and if any errors are found we will then need to lodge a TFN report with the updated information. The deadline for lodging the TFN report is 31 July 2011.
Please do not hesitate to contact us should you have any queries.
ATO KEY DATES
21 December 2010
Due date for lodging and paying November 2010 monthly activity statement
15 January 2011
Due date for lodging taxable large/medium companies and superannuation fund tax returns
Due date for lodging taxable large/medium Trusts tax returns (annual total income greater than $10m in 2009)
Due date for lodging taxable head company of consolidated group tax returns
21 January 2011
Due date for lodging and paying December 2010 monthly activity statement
21 February 2011
Due date for lodging and paying January 2011 monthly activity statement
28 February 2011
Due date for lodging and paying all Activity Statements for period ended 31 December 2010
CHAMPION'S STAFF NEWS
We are very pleased to welcome Brian Goodridge who has recently joined the Champion's team. Brian is CPA qualified and has over 6 years experience in business services.
Team Member Profile
This quarter our team member profile is on David Freney - Client Manager
David has been a member of Champion’s for almost 7 years. David started directly after finishing high school, completed university in 2008 and, this year, completed his CA qualifications. David has been a client manager for the past 3 years.
David manages a portfolio of about 15 client groups, including some of our largest, across various industries in including professional services, manufacturing, medical, automotive, waste management and wholesaling. David works closely with all his clients assisting in management accounting, budgeting, bank financing, statutory compliance and various business advisory roles.