Dear Santa,
Thank you for the opportunity to provide advice on your Australian tax position. We are concerned by a number of areas of your operation that will no doubt come under scrutiny by the ATO. We note these below:
GST
Most goods imported into Australia with a value above $1,000 are subject to GST. With approximately 4,329,000 children in Australia on your list, averaging $40 per gift (depending on whether they have been naughty or nice), we estimate that you will be liable for GST in excess of $17,317,192. We need to discuss tax structuring urgently.
We are also concerned that you also may face other commercial issues from Australian retailers who will perceive your ‘gift’ giving as a hostile attempt to gain market share (please google recent comments by Gerry Harvey and GST).
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If you established your business under a company structure as part of the set-up process there would have been shares issued, so you probably own shares in your company. Not a big deal you may think, with all the focus on the business and building it. The shares are just something necessary as part of the set up process and you may not even be holding the share certificates.
If this is you it might be an idea to have another think about it because the beneficial ownership of the company and the business rests with the shareholders. That’s OK while the status quo remains but the moment there is any change in the business the issue of who holds the shares becomes important.
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Tax consolidation – Juggling tax losses
We are often asked whether it’s possible to offset a loss in one company against the profit in another. The answer is that there is no automatic way of offsetting losses and profits between your companies.
Most people try to manage a situation like this by putting through charges between the companies after year end (for example, a charge from the profit making company to the loss making company for ‘management fees’). This is not an effective strategy and creates a risk position for you.
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Predictions and realities for the new financial year – What you need to know in 2011/2012
It’s a new financial year and with it comes a series of changes and challenges. The central message for the new financial year is ‘cash is king’ and will remain so for some time to come.
While the economy is performing well, consumers are wary about parting with their cash. Part of the problem is that around 50% of Australia’s growth is coming from 10% of the economy. For the rest of the economy, petrol prices are high, interest rates are likely to rise, and the rate of debt default is at record highs.
Consumer sentiment shows that no one really feels as secure as the headline economic data indicates so discounting and long decision making processes are likely to continue.
For business, take the ‘cash is king’ message to heart. Some very high profile and established businesses have dissolved recently so stick to your trading terms and watch your debtors or you may be caught out by someone else’s problem.
Tax planning: where are the real benefits?
Some tax planning only creates timing benefits rather than real savings. So the question is; what delivers real results? The majority of tax planning falls into one of three categories – health and hygiene decisions that every business should review each year, timing benefits, and permanent savings.
The timing benefits do exactly that. They create tax savings that should ultimately materialise over the life of the business but they bring them forward.
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