This article identifies some of the issues in the tax man’s sights before 30th June, and what you can do to ensure your house is in order.

We’ve outlined below the key areas the Tax Office is focusing on, along with the strategy you should consider to ensure you are compliant.

Focus #1: Increasing Tax Office Audit Programme
Strategy #1: Get Audit Insurance

The Tax Office is widening the net on small business and individual compliance.  Everyone – businesses and individuals – will be audited in the next 3 years.

Audit insurance helps by covering the costs of an audit that are incurred by a tax payer from their professional advisers, legal teams and any other person that assists with the preparation of required documentation and information for the Tax Office.
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Focus #2: Invalid Trust Deeds 
Strategy #2: Review your Trust Deed

Do you have a Trust? Changes in the tax rules mean some trust deeds are now INEFFECTIVE and if they are not amended, will pay tax at 47%.
You should have your Trust Deed reviewed by your accountant to ensure that it satisfies the new rules.
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Focus #3: Trustees of Self Managed Super funds 
Strategy #3: Review the Trustee Requirements

Trustees of self-managed super funds can now be criminally prosecuted for non-compliance – including jail sentences.
You should have your accountant review the trustee of your super fund to ensure that it satisfies the new rules.
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Focus #4: Personal Services Income (PSI)
Strategy #4: Ensure the PSI rules are complied with and “SHAM” contracts are shut down

The Tax Office is imposing 75% penalty tax on people ignoring the personal services income rules.  If you derive your income from primarily one source through an entity such as a trust or company, you could be in breach.
This should be discussed with your accountant.
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Focus #5: Company Constitutions and the rules surrounding paying dividends
Strategy #5: Amend the Constitution

Recent changes mean that some Company Constitutions are now invalid – which means they cannot pay fully franked dividends.  This has major tax consequences from a flexibility and income distribution point of view.
You should get your Company Constitution reviewed to see if it requires the necessary changes.
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Focus #6: “Bucket” Companies
Strategy #6: Review the Trust Deed

Again, if you have a trust and it shares some of it’s income with a company or what we call a “bucket company”, then new rules mean you might have  to pay tax at an effective rate of 93%.
You should have your trust deed reviewed by your accountant to ensure that it satisfies the new rules.
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Focus #7: Division 7A of the tax ACT
Strategy #7: Review the loans the business has made to the owners

Division 7A is an area of Tax Law that looks at the way business loans money to its owners.  There have been major changes to how this works and big tax consequences for getting it wrong – up to 47% tax rate.
You should have any loans to the business owners reviewed at to determine what your options are.

If you would like one of our accountants to review any of the above focus strategies, please send us an email and we will contact you to arrange a time to meet.