• Changing the Rules for Trusts
• Social Media - how does it impact on your business?
• Are you using the ATO Business Portal?
• Super Reforms - Making for a Stronger Super
• Banklink - A good business decision
• Important Dates
• Client Testimonial

Welcome Note

Welcome to 2011 and What's Happening at DSR in February.

We hope you and your family stayed safe over the holiday period and enjoyed a happy festive season.

All of us at Davis Stewart Rowland are looking forward to helping you achieve your business and personal goals in 2011 and work towards building a successful retirement plan.

We aim to bring you interesting and tax effective ideas for saving you money, explore new developments in taxation and the way we do business, and keep you up to date with issues that may affect you and your business.

Remember...

'whatever your financial and accounting needs we can work with you to find a solution".

Changing Rules for Trusts

 A lot of family businesses use discretionary trust structures. These have been popular because they provide both a level of risk management, separating the business from your personal assets, and are also quite tax efficient. A discretionary trust allows the trustee to appoint the income of the trust (this is typically the profit of the business) to any of its beneficiaries in the proportions that it determines from year to year. The entitlement of the beneficiary is not fixed, rather it is a decision of the trustee each year. Normally the trustee is either the key person in the business or a company controlled by this person. In a typical family situation, Mum and Dad may be the trustees or directors of the trustee company. Using this structure business owners have the flexibility to distribute income in the most tax efficient way. None of this has changed.

A common technique employed by a lot of trusts was to appoint some of the income to a related company. Normally, this was done where the other beneficiaries had received income for the year that would take them past the 30 cent in the dollar tax rate and by appointing this excess income to a company the family could limit its immediate tax cost at 30 cents in the dollar. It was also common for trusts to appoint this income to the company but perhaps not pay all or any of this income over to the company. It created a debtor creditor relationship between the company and trust which is called an unpaid present entitlement. This simply means that the company is entitled to the money but it was not paid at the time.

Apart from limiting the amount of tax payable the main reason for employing this technique was because often the profits of the business had not fully realised into cash. Most businesses find that some of their profits can be tied up in stock, debtors, or other working capital. The profit has been made; it is just not cash in the bank at the end of the financial year. And, practically, you can’t pay out profits that haven’t turned into cash. Sounds sensible to most of us but the Tax Office don’t see it that way.

Last year the Tax Office announced that where there is an unpaid present entitlement between a trust and a company beneficiary that continues past the financial year, they will treat this as a loan from the company back to the trust. The implication of this is that it could trigger Division 7A of the Tax Act and cause the amount to be a deemed dividend. In most cases you want to avoid this situation. Income appointed by a trust to a company after 16 December 2009 is affected by these new rules (and could affect your 2010 income tax return).

Many small businesses have used this strategy as a way of managing their tax and cash flow position and dealing with the differences between their accounting profits and available cash. There are still a number of options available to you in how you manage this situation.

If you operate your business through a trust and have used a related company as a beneficiary, call us to discuss what needs to change and review your tax strategy and position.

• view, prepare, lodge and revise activity statements
• view and request refunds from
  • income tax accounts
  • fringe benefits tax accounts
  • excise accounts
  • some superannuation accounts
• view your statement of account and payment options
• update your details
• transfer funds between your accounts
• communicate with us through a secure mailbox.

By applying for an AUSkey through the Australian Business Register you have access to expanding list of government online services therefore saving you precious time and money in managing your business.  

Contact us today about setting up your access to the ATO Business Portal.  It's a good business decision.

Super Reforms - making for a Stronger Super

On 16 December 2010 the Federal Government announced a Super System Review, reforming the current superannuation system to make it stronger and more efficient, aiming to maximise retirement income for members.

Specifically, the Government will:

• create a new simple, low cost default superannuation product called 'MySuper';
• make the processing of everyday transactions easier, cheaper and faster, through the 'SuperStream' package of measures; and
• strengthen the governance, integrity and regulatory settings of the superannuation system, including in relation to self managed superannuation funds.

Self Managed Super Funds have received a number of recommendations regarding their governance, efficiency, structure and operation. The Government will implement a range of measures relating to their integrity and increase community confidence in the sector. They will also improve the operation and efficiency of the sector by enabling more efficient transactions, including rollovers from superannuation funds. To view the recommendations and the government's response click here

If you would like to discuss how these reforms may affect you, talk to us today.

Important Dates

21 February 2011 
- January 2011 Monthly Instalment Activity Statement

28 February 2011
- October - December 2010 Business Activity Statement
- October - December 2010 Superannuation Guarantee Charge

About Davis Stewart Rowland

Davis Stewart Rowland is a three partner firm located at The Entrance on the NSW Central Coast. With over 50 years experience we have an in-depth knowledge of what the business owner and investor needs to embark and stay on the path of growth and wealth creation.

We have a unique appreciation of the issues business owners and investors face, which makes us an integral part of our client's advisory team. Our comprehensive approach includes:

• Benchmarks
• Tax minimisation plans
• Cash flow forecasting
• Business information processing
• Management & strategic advice

Whatever your needs we can help find a solution.

Contact us today