Company

The Company Tax Rate Saga

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In the last week of the August Parliamentary sittings, the controversial corporate tax cut plan for the big end of town (i.e., companies with an aggregated turnover of over $50 million) was defeated.

In addition, long-awaited legislation impacting the company tax and franking rates for small to medium companies (i.e., introducing a new ‘base rate entity passive income test’ from the 2018 income year to qualify for the lower 27.5% tax rate) was passed.

This legislation was particularly relevant for company rates applicable to passive investment and ‘bucket’ companies, which may now need to reconsider earlier lodged 2018 company tax returns, as well as the amount of franking credits attached to dividends paid from 1 July 2017.

Additionally, consideration may also need to be given to the company tax rates (and in certain circumstances, the franking rates) previously applied with respect to the 2016 and 2017 income years. 

This is in light of the recently issued ATO compliance and administrative approaches for the 2016, 2017 and 2018 income years.

Editor: Unfortunately, the recent Government delays have created much confusion in this area, and in certain cases, a review and possible amendments may be required for previously lodged returns.

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

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NEWS: Reforms to stop companies avoiding employee entitlements

The Government will introduce new laws to stop corporate misuse of the Australian Government’s Fair Entitlements Guarantee (FEG) scheme.    The FEG scheme is an avenue of last resort that assists employees when their employer’s business fails and the employer has not made adequate provision for employee entitlements, but it is clear that some company directors are misusing the FEG scheme to meet liabilities that can and should be paid directly by the employer, rather than passed on to Australian taxpayers.     The proposed changes will:    -           Penalise company directors and other persons who engage in transactions which are directed at preventing, avoiding or reducing employer liability for employee entitlements;    -           Ensure recovery of FEG from other entities in a corporate group where it would be just and equitable and where those other entities have utilised the human resources of the insolvent entity on other than arm’s length terms; and    -           Strengthen the ability under the law to sanction directors and company officers with a track record of insolvencies where FEG is repeatedly relied upon.    These changes will be targeted to deter and punish only those who have inappropriately relied on FEG, and so should not affect the overwhelming majority of companies who are doing the right thing.     Editor: The Government has separately released a ‘Comprehensive Package of Reforms to Address Illegal Phoenixing’, which will assist regulators to better target action against those who repeatedly misuse corporate structures and enable them to take stronger action against those entities and individuals.       These reforms will include (for example) the introduction of a Director Identification Number (DIN) (to identify all directors with a unique number), and making directors personally liable for GST liabilities as part of extended director penalty provisions.    _____________________________________________________________  Click  here  to sign up to our Newsletter to receive the latest in strategic advice, taxation and business  _____________________________________________________________  Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.  www.mawcons.com.au  admin@mawcons.com.au  (08) 9364 4204  _____________________________________________________________   

The Government will introduce new laws to stop corporate misuse of the Australian Government’s Fair Entitlements Guarantee (FEG) scheme.

The FEG scheme is an avenue of last resort that assists employees when their employer’s business fails and the employer has not made adequate provision for employee entitlements, but it is clear that some company directors are misusing the FEG scheme to meet liabilities that can and should be paid directly by the employer, rather than passed on to Australian taxpayers.

The proposed changes will:

-         Penalise company directors and other persons who engage in transactions which are directed at preventing, avoiding or reducing employer liability for employee entitlements;

-         Ensure recovery of FEG from other entities in a corporate group where it would be just and equitable and where those other entities have utilised the human resources of the insolvent entity on other than arm’s length terms; and

-         Strengthen the ability under the law to sanction directors and company officers with a track record of insolvencies where FEG is repeatedly relied upon.

These changes will be targeted to deter and punish only those who have inappropriately relied on FEG, and so should not affect the overwhelming majority of companies who are doing the right thing.

Editor: The Government has separately released a ‘Comprehensive Package of Reforms to Address Illegal Phoenixing’, which will assist regulators to better target action against those who repeatedly misuse corporate structures and enable them to take stronger action against those entities and individuals.

These reforms will include (for example) the introduction of a Director Identification Number (DIN) (to identify all directors with a unique number), and making directors personally liable for GST liabilities as part of extended director penalty provisions.

_____________________________________________________________

Click here to sign up to our Newsletter to receive the latest in strategic advice, taxation and business

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

_____________________________________________________________

 

UPDATE: No small business tax rate for passive investment companies

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The Government has released draft tax legislation to clarify that passive investment companies cannot access the lower company tax rate for small businesses of 27.5%, but will still pay tax at 30%.

The amendment to the tax law will ensure that a company will not qualify for the lower company tax rate if 80% or more of its income is of a passive nature (such as dividends and interest).

The Minister for Revenue and Financial Services said the policy decision made by the Government to cut the tax rate for small companies was meant to lower taxes on business, and was not meant to apply to passive investment companies.

 

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Click here to sign up to our Newsletter to receive the latest in strategic advice, taxation and business

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Mawer Consulting is a consulting firm located in Perth, Western Australia that provides a range of successful businesses with strategic business advice, accounting and taxation services.

www.mawcons.com.au

admin@mawcons.com.au

(08) 9364 4204

_____________________________________________________________

Liability limited by a scheme approved under Professional Standards Legislation