Anyone concerned by the ATO’s announcment that they intend to target company/trust structures set up to minimise tax by redistributing income?
I would imagine this may affect quite a few people from PI.com. Apparently some test cases are prepared and ready to roll, to ensure that if it isn’t a business by ATO definition, you will be paying marginal rates.
Originally posted by ANUBIS:Anyone concerned by the ATO’s announcment that they intend to target company/trust structures set up to minimise tax by redistributing income?
I would imagine this may affect quite a few people from PI.com. Apparently some test cases are prepared and ready to roll, to ensure that if it isn’t a business by ATO definition, you will be paying marginal rates.
If you set up your company/trust properly and documents/records everything you do then you should not be worry about anything….every is legal and documented like trustee minutes of meeting….income and expenses…
Warm Regards
ChanDollars
[Keep going, you’re on your way to financial freedom]Chan$,
The ATO aren’t trying to crack down on claims, they are looking at the actual structure of investments and businesses. If you invest in property via a company/trust set-up they are looking to ensure you are actually a business. If not your structure will be null and void, irrespective of how good your records are.
Originally posted by ANUBIS:Chan$,
The ATO aren’t trying to crack down on claims, they are looking at the actual structure of investments and businesses. If you invest in property via a company/trust set-up they are looking to ensure you are actually a business. If not your structure will be null and void, irrespective of how good your records are.
Guess what ATO is government and most politics use company/trust structure, therefore they are auditing themself…..I wouldn’t be concern…..
Warm Regards
ChanDollars
[Keep going, you’re on your way to financial freedom]Here is the article (cut and paste into explorer):
http://www.theaustralian.news.com.au/common/story_page/0,5744,8805421%255E462,00.html
I am a little concerned but I think they are mainly targeting people who try to run their regular everyday business through a trust e.g. doctor’s practice, mechanic etc. However the lines are a bit blurred as “income from personal exertion” can cover a lot of things including wraps etc.
What do you think Steve?
“Most people operate under a false ceiling which is 3 feet high” Stuart G Goldsmith
Did you see that property investor on the front page of the Australian? She was pictured standing next to her mercedes and was quoted as owning 22 properties.
She is crazy. Going public like that will only cause problems. imagine if her tenants see her. they will think she is rich and maybe decide not to pay the rent. friends will see her and get jealous. The ATO will see her and maybe look into her earnings. She may even become a target for ‘baddies’. It is not very good to go public like that!
What do others think?
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Saw this article to and did some searching for further information.
This crackdown is aimed more at people like private contactors etc who setup companies, trusts and partnerships etc to income split. So an example would be if there are not assets associated with the business and the type of work is similar to what a standard salaried employee would do then income splitting should not be allowed. Anyhow this seems to be the thrust of it.
The following extract might be helpful:
“ATO targets income splitting – through partnerships, companies and trusts
Tax Commissioner Michael Carmody has announced that the ATO will fund a number of test cases on arrangements under which personal services businesses split personal services income.
The cases selected will test arrangements that involve income splitting by partnerships, companies or trusts and the retention of profits in companies.
The personal services businesses targeted are those whose income is mainly a reward for the personal efforts or skills of an individual taxpayer.
They are not businesses that derive their income principally from their assets such as a farm or a transport business operating a semi-trailer.
Nor do they derive their income from their business structure such as a large accounting practice or a radiologist with a number of technical staff and an array of technical equipment.
“I will select cases to get clarification from the courts on how general anti-avoidance rules apply to these arrangements.”
The ATO has indicated that appropriate cases will be selected to test the following areas:
• ‘Husband and wife’ partnerships that derive personal services income and split the income 50:50 but only one of the partners performs the main bulk of the work.• Retention of personal services income by a company.
• Remuneration paid not by an entity to a principal which is not commensurate with the value of the services provided.
• Excessive remuneration to an associate such as a spouse for non principal work.
• Whether different considerations apply to professionals and tradespeople.
• Whether profits can be retained by a personal services business to acquire business assets.
• Whether profits can be used by a personal services business to retire debt incurred in acquiring the business.
• Whether different considerations apply t personal services businesses that are trusts if they are established before personal services are commenced.
• The distinction between personal services income and business structures.”
Cheers – Gordon
Funnily enough I just spoke to my accountant about this yesterday. It also targets computer contract workers which I am about to become.
The ATO uses 4 tests:
1. Results test – are you paid for a result e.g. doing a discreet task and not just turning up to work every day for 6 months2. Employment test – do you have an employee
3. Unrelated clients – do you have more than one client who are not related to each other
4. Business premises – do you have an office not in your own home.
If I pass any of these I’m classified as a business and can claim for much more stuff and also pay myself a living wage and then distribute the rest as dividends.
If I don’t all the company income is classed as my personal income.Kim
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