The tax office has announced today that business owners will be given a one-off opportunity to correct past mistakes regarding payments and loans from private companies.
Where an honest mistake or inadvertent omission has been made and the business owner admits the mistake, penalties will be waived.
The offer applies to mistakes made between 2001/02 and 2006/07, and tax payers have one year until 1 July 2008 to admit their mistakes, says Tax Commissioner Michael D’Ascenzo.
He says that people who follow a policy statement and include outstanding interest or previously undeclared payments in their 2007/08 return can take advantage of the new law without being concerned about further inquiries.
From 1 July 2008, the tax office will resume audit work to make sure the payments made by private companies are correctly accounted for and company loans are not used to distribute tax-free profits.
A spokeswoman for the tax office says the move will allow people to look back over the last five years and correct any mistakes. “If it is a loan from a company, you can put in place a loan agreement and pay interest on any money owed, with no penalties.”
Peter Bembrick, tax partner at HLB Mann Judd NSW, says the concern arises around people taking a loan from a private company. “They really never intend to repay it; it’s really another way of getting profits out and is treated quite harshly by the ATO.”
There is nothing wrong with taking a loan from your business, he says, but it needs to be on commercial terms, generally repayable in seven years. The interest on the loan must be equal to the tax office benchmark interest rate, and there has to be formal written loan agreements and minimum repayments each year.
“If it’s clear it’s not an honest mistake, or the taxpayer has not complied in the past, they may not be eligible for the amnesty,” he warns.
The tax office will look at the omission to see whether it was a mistake or not.
It has a number of criteria so it will look at the explanation and examine the situation, says Ali Noroozi, tax counsel at the Institute of Chartered Accountants in Australia. He says: “This is a good example of how government and the tax office has consulted with industry to fix a problem.”
– Amanda Gome
See also today’s Michael Schaper blog on tax. Has the Howard Government squandered its opportunity for reform? What do you think? Email feedback@smartcompany.com.au
Australia’s sharemarkets have recovered from an initial dramatic fall in this morning’s trading, with the benchmark S&P/ASX 200 rallying to be 0.6 points above its opening 6082.9 at 12.10am.
The S&P/ASX 200 dropped close to 30 points after opening this morning, almost reaching the 6050 point mark not long after 10am.
The Australian dollar, which has followed the markets in dropping over the weekend, has also steadied this morning – at 12.20pm it is worth US85.12c, just above the last Sydney US85.10c close.
– Mike Preston
SME owners are significantly more optimistic about their business fortunes in the September 2007 quarter than their big business colleagues, according to a new NAB survey.
According to the NAB Business Confidence Index, SMEs with annual revenue of $2 million to $3 million are most confident, with optimism about the future diminishing the larger the business gets.
Overall, however, businesses are looking positively to the September quarter, with the business confidence index recording its best result since December 2003.
Only business owners in the hospitality and accommodation sector are pessimistic about the year ahead. SMEs in the business services and finance/insurance sectors are the most confident about their prospects.
– Mike Preston
Business groups have today welcomed John Brumby as the new leader of the Labor Government in Victoria.
Brumby was elected leader when the Labor caucus met this morning for the first time since Steve Bracks’ shock resignation on Friday. Bracks backed Brumby in his resignation speech, describing him as the “best treasurer of any government in Australia”.
Attorney-General Rob Hulls was elected Deputy Premier, to replace the departing John Thwaites.
Australian Industry Group Victorian director Tim Piper says business is overwhelmingly positive about Brumby becoming Premier. “From a business perspective we’ve always had a good relationship with him as Treasurer, he’s been active in promoting business in Victoria especially in innovation areas, and we wouldn’t expect that zeal to help business to change at all,” Piper says.
Brumby’s support for the construction of a synchrotron electron accelerator and recent establishment of a board to help develop design intellectual property opportunities in Victoria are two areas where his support for innovation has been a plus for business, Piper says.
Brumby’s comment that he will have a particular focus on improving Victoria’s infrastructure are welcomed by Piper. “Good infrastructure is one of the reasons Victoria has had a strong economy, despite not being a mineral-based economy, and that will need to continue. Transportation links must be maintained, the channel deepened and road and rail – and none of that is cheap.”
VECCI and business in general has a good working relationship with Brumby, acting chief executive officer Wayne Kayler-Thomson says.
“Having held the portfolios of Treasury, Innovation and State and Regional Development, Premier Brumby understands key economic issues pertaining to business,” Kayler-Thomson says.
Almost 30% of Victorian businesses believe that confidence in the state’s economic performance will improve over the next 12 months, up from 22% in March, according to the new Visa-VECCI Business Trends and Prospects Survey.
Businesses surveyed in June reported improved trading conditions, sales and employment, despite profitability falling slightly.
– Mike Preston
The volume of new home sales dropped 0.8% in June and 12% for the 2006/07 financial year, according to new Housing Industry Association figures released today.
New home sales showed “a considerable weakening” in 2006/07, HIA chief economist Harley Dale says.
Retail sales figures for June to be released on Wednesday may be crucial in determining whether the Reserve Bank of Australia raises interest rates in August, The Australian Financial Review reports today. Economists predict that retail sales will increase by between 0.8% and 1% in June.
And defying all the sub-prime mortgage gloom in the US at the moment, GDP in the US increased by a strong annual rate of 3.4% in the June quarter, according to new US Government figures. The result represents a significant recovery after first quarter annual growth of 0.6%.
– Mike Preston
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