Tax law

What are retained earnings?

Retained Earnings (Retained Earnings) are a financial metric that offers a valuable insight into a company’s financial health, extended stability and potential for future growth.  They represent the profit a company has retained overtime after accounting for all liabilities including the payment (if any) of dividends. [Read more…]

What is an ‘earnout’ clause in a business acquisition?

The term ‘earnout arrangement’ (Earnout) has been defined by the Australian Taxation Office (ATO) as “any transaction in which an income-earning asset is sold for consideration that includes the creation of an ‘earnout right’ (Earnout Right) for the seller of the asset, according to TR 2007/D10.   An Earnout Right is further defined as:

“a right to an amount calculated by reference to the earnings generated by the asset for a defined period following the sale (generally a period of between one and five years) as defined at paragraph 3 of TR 2007/D10.” [Read more…]

High Court asset protection 101 – buy property in the name of spouse

The decision of the High Court of Australia in Bosanac v Commissioner of Taxation [2022] HCA 34 (Bosanac) reaffirms the viability of protecting real property assets by registering them in the name of a spouse. [Read more…]

Digital Games Tax Offset proposed by Albanese

The Australian Government has announced its plans to enact the country’s first ever federal, “refundable tax offset” for the development of video games.  On 28 October 2022, the Albanese Labor Government announced its support for the digital games industry by proposing new legislation to develop a Digital Games Tax Offset (DGTO) in the near future.

[Read more…]

R&D Tax Incentive determination on clinical trials

The Australian Government Department of Industry, Science, Energy and Resources has consulted in relation to a proposed tax incentive in relation to unapproved therapeutic goods (R&D Tax Incentive).  Such incentive is proposed to enable innovation and growth to relevant companies conducting R&D activities by offsetting the costs of eligible research and development. [Read more…]

Present entitlement and trusts – what does it mean?

Part III, Division 6 of the Income Tax Assessment Act 1936 (Cth)(Act) contains provisions that determine who must pay the income tax in respect of the net income of a trust estate.  One of the features of Division 6 is the notion of ‘present entitlement’ (which curiously is not defined) and as such the Courts have had to determine its meaning.  This article discussed how the High Court interpreted the meaning of “present entitlement” and discusses when a person is considered to be presently entitled to trust assets in different circumstances. [Read more…]

What is a franked dividend?

There are two concepts in paying dividends that business people must know – franking credits and dividend yield.  The concept of dividend yield means the financial ratio that measures the quantum of dividends paid to shareholders relative to the market value per share.  The dividend yield is more desirable when franking credits are included.  Part IIIAA of the Income Tax Assessment Act  1936 (Cth)(Act) deals with legal aspects of franking of dividends, including what constitutes franking and company requirements for dividend statements to shareholders. This article discusses what a franked dividend is, the types of franked dividends, how they work and dividend imputation. [Read more…]

The going concern exemption to GST

In Australia an exception to the requirement to pay the broad based consumption tax known as the Goods and Services Tax (GST) may apply to the acquisition of business assets as part of a business sale. [Read more…]

Directors and their associates to be personally liable for SGC and PAYG obligations

On 13 October 2011, the Federal Government introduced new tax legislation into Parliament.

The Proposed legislation increases directors’ personal liabilities for non-compliance with Pay As You Go (PAYG) withholding tax and Superannuation Guarantee Charge (SGC) contributions and also increases the Australian Tax Office’s (ATO) powers.  The new law is aimed at protecting employees against phoenix company activity.   It is important to note that fraud or dishonesty of the companies, directors, or associates is not an element, therefore inadvertent errors and/or mischaracterisations of payments are included. [Read more…]

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