Division 7A is part of the Income Tax Assessment Act 1936 and is essentially in place to prevent profits or assets of a company being given tax-free to shareholders or their associates. This can occur where distributions of profit are disguised as loans or other transactions effectively allowing the shareholder or their associate to have access to the corporate tax rate. A consequence of Division 7A applying to certain loans and transactions is that an unfranked dividend is deemed to have been paid to the shareholder or associate in the year the loan is made or the transaction occurs.
Division 7A is triggered when a payment or other benefit by a private company is provided to a shareholder or an associate.
A payment or other benefit can include:
Division 7A does not apply to amounts that are assessable to the shareholder or their associate under other parts of the income tax law, such as normal dividends or director’s fees.
Payments made to these parties in the normal course of business, such as wages, expenses or repayments of loans, do not constitute a Division 7A loan.
A payment or benefit that is potentially subject to Division 7A is not treated as a dividend if it is repaid or converted into a Division 7A complying loan by the company’s lodgement day for the income year in which the payment or benefit occurs.
The definition of an “associate” can be quite broad and may include:
When Division 7A is triggered, the recipient shareholder or associate is deemed to have received a dividend equal to the amount of the payment, loan or benefit received. Since a Division 7A deemed dividend cannot generally be franked, if the recipient shareholder or associate is on the top marginal tax rate they would have to pay 45% tax on the dividend.
In the event that repayment of the debt is not possible, a written loan agreement must be put in place so that the loan is not treated as a dividend. If a written loan agreement is put in place, annual repayments of principal and interest are required. A deemed dividend is likely to arise in a later income year if these minimum repayment obligations are not met.
The written agreement must include:
Cloud computing is the delivery of computing services – including servers, storage, databases, networking, software – over the Internet (“the cloud”). Typically, you only pay for cloud services you use, helping you lower your operating costs, run your infrastructure more efficiently and scale as your business needs change.
Cloud computing eliminates the capital expense of buying hardware and software and setting up and running on-site data centres – the racks of servers, the round-the-clock electricity for power and cooling and the IT experts for managing the infrastructure. Server technology is expensive!
Most cloud computing services are provided as self service and on demand, so even vast amounts of computing resources can be provisioned in minutes, typically with just a few mouse clicks, giving businesses a lot of flexibility and taking the pressure off capacity planning.
Cloud computing makes data backup, disaster recovery and business continuity easier and less expensive because data can be mirrored at multiple redundant sites on the cloud provider’s network.
Many cloud providers offer a broad set of policies, technologies and controls that strengthen your security posture overall, helping to protect your data, apps and infrastructure from potential threats.
Cloud computing allows you to access your data from virtually anywhere that you have an internet connection. No VPN, no firewall issues ... just attach to the internet and you are ready to run your software and access your data.
When you update data on one device, all other devices will see the update the next time they access the data. There is no syncing or file copying. Data is updated across all devices simultaneously.
Hybrid cloud is a mixture of both cloud computing and in-premise networking. Some software may not be available yet to run on the cloud, or you may want to keep some data local to your business. In these scenario’s you can mix cloud and local networking to achieve the results you want.
The ATO has released a resource page that allows tax payers to download information, about what they may be able to claim a deduction for this year, based on their occupation.
This information is relaible and valuable because it's straight from the ATO.
Described by history as a philosopher-king, Marcus Aurelius was Emperor of Rome. He was a stoic (dedicated to wisdom, morality, courage and moderation).
His philosophy is almost paradoxical, when you consider that he was a man of enormous power and wealth, yet a proponent of moderation in all things in the pursuit of a simple life.
Teachings of Marcus Aurelius:
Ignore what others are doing - "Do not waste what remains of your life in speculating about your neighbors."
Reality is shaped by your opinion - “Life is but what you deem it. If I do not view the thing as an evil, I take no hurt. Reject your sense of injury, and the injury itself disappears.”
Do less - “If you would know contentment, let your deeds be few. Better still limit them strictly to such as are essential.”
Death is knocking at your door - “If you had died today, and your life’s story was ended, going forward regard what further time you have as a gift; use it well!”
You’re stronger than you think - “You will get beaten up, break a few bones, bleed, and as a result— you will get stronger.”
You are working for the good of humanity - “As humans, we live to help one another. No man is his own island.”>
Never complain - “Do the very best that can be said or done with the materials at your disposal, dont waste energy complaining!”
You can live happily anywhere - “Let it be clear to you that the peace of green fields can always be yours, in this, that or any other spot; and that nothing is any different here from what it would be any other place.”
Depreciation (also called capital allowance) is what happens when a business asset loses value over time. A work computer, for example, gradually depreciates from its original purchase price down to $0 as it moves through its productive life.
To understand how profitable your business is, you need to know all your costs. Depreciation is one of those costs because assets that wear down eventually need to be replaced. Depreciation accounting helps you figure out how much value your assets lost during the year. That number needs to be listed on your P&L report, and subtracted from your revenue when calculating profit. If you don’t account for depreciation, you’ll underestimate your costs, and think you’re making more money than you really are.
Because depreciation lowers your profit, it can also lower your tax bill. If you don’t account for depreciation, you’ll end up paying too much tax. You can gradually claim the entire value of an asset off your tax.
While most business expenses are tax-deductible, they’re not all depreciable. There’s a difference. Consumables like stationery can be deducted from tax but you have to claim for them in the year you bought them. For most businesses, only fixed assets can be depreciated.
A fixed asset is something that will help you generate income over more than a year. It includes things like tools, machinery, computers, office furniture, vehicles, and buildings. You don’t always have to own them. Some leased items may be depreciable, too.
There are many different methods of calculating depreciation, and some of them are quite complex. Three of the most common are:
Straight line depreciation
Under this method, the asset depreciates the same amount every year, till it has zero value. For instance, an asset expected to last five years would depreciate by one-fifth of its ticket price each year.
Diminishing value depreciation
Under diminishing value depreciation, an asset loses a higher percentage of its value in the first few years. That rate of depreciation gradually slows down as time goes on.
Units of production depreciation
The lifespan of some assets is better measured by the work they do than by the time they serve. For example, a vehicle might travel a certain number of kilometres, or a packaging machine might box a certain number of products. You could depreciate these assets based on usage rather than age.
It's a cliche, but its critically important. Working ON your business is vital, for its longevity and prosperity.
You do less! This is where I hear, “but I'll go broke if I do less!”. Maybe its better to go broke and find a purpose in life again, than slowly killing yourself in a role thats just not working for you. Or maybe by doing less, (working in the business), you will have the time to start working ON the business; allowing someone else the opportunity to work in the business, instead of you.
By removing yourself from the everyday tasks of your business, you may be able to actually grow and up scale your business, including focusing on ways to increase revenue and profitability. Focus on building those systems that will allow you to DELIGATE and SYSTEMISE. Delegating allows you to free up your own time and leverage the multiplying effect of many more people. Systemising allows you to provide efficient and productive routines to those people you have delegated to.
Finally, learn to lead. Yes learn, because leaders are not born, they are trained to lead. Seek out leaders you admire and examine carefully how they operate. Then try to emulate their methods and mannerisms. Most importantly, don’t be too hard on yourself if you fail along the way. The difference between a master and an apprentice, is that the master has made more mistakes, for longer. Give yourself time to learn and enjoy the journey.
The information contained in this Web site and Blog is for general guidance on matters of interest only. The application and impact of laws can vary widely based on the specific facts involved. Given the changing nature of laws, rules and regulations, and the inherent hazards of electronic communication, there may be delays, omissions or inaccuracies in information contained in this site. Accordingly, the information on this site is provided with the understanding that the authors and publishers are not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. Before making any decision or taking any action, you should consult a Sky Public Accountants professional.
While we have made every attempt to ensure that the information contained in this site has been obtained from reliable sources, Sky Public Accountants is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information in this site is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. In no event will Sky Public Accountants, its related partnerships or corporations, or the partners, agents or employees thereof be liable to you or anyone else for any decision made or action taken in reliance on the information in this site or for any consequential, special or similar damages, even if advised of the possibility of such damages.
Certain links in this site connect to other Web sites maintained by third parties over whom Sky Public Accountants has no control. Sky Public Accountants makes no representations as to the accuracy or any other aspect of information contained in other Web Sites.
Professional Liability limited by a scheme approved under Professional Standards Legislation.