William Buck Australia
As a fully integrated firm of Chartered Accountants and advisors, William Buck provides a complete solution. Putting you at the core of the business, our advisors work together to ensure that careful consideration is given to your business and personal wealth affairs.
Working closely with you and your team, our Business Advisors can help you plan and implement contemporary business strategies and practices to meet your business’s full potential.
Our commercially minded tax specialists offer clear, responsive advice to manage your tax risk, address local and international issues, and develop strategies to optimise your tax position.
Our audit team has extensive experience in a range of engagements, giving stakeholders independent and objective assurance on financial information, transactions and processes.
Our Corporate Advisory team provides objective, strategic and commercial advice across a broad range of business issues. Our work spans the breadth each engagement from the origination of ideas to managing the transaction process, valuation and structuring.
Our highly experienced team of liquidators and trustees use their extensive expertise to assist in times of financial distress, achieving the best outcome for all stakeholders.
By understanding not only what you want to achieve but why it’s important, our wealth advisors can create strategies attuned to your key priorities. The end result is a plan focused on your life goals.
The William Buck Hour could be the most profitable hour you spend this year.
Sweeping changes to financial reporting may impact your financial position and business operations.
Our experts are here to help you understand what you need to know about Safe Harbour legislation.
Check our Private Business Tax Reform resource centre to see how the most significant changes may affect you and your business.
William Buck has a team of professionals with specialist experience and know-how on a range of industry sectors.
Our advisors understand the risks and opportunities unique to the agribusiness sector. Taking a strategic view of your operations they provide relevant guidance and advice.
Assisting public and private schools, vocational colleges, universities and private training providers, our education specialists provide timely and valuable assurance services together with strategic, financial and management advice.
Our Government and public sector team has substantial experience in assisting all levels of government to review their structures and develop strategies, in line with relevant legislative requirements and accounting and audit standards.
Working with over 1,600 clients in the health sector, our advisors help practitioners and health care corporates achieve their business and personal goals
Our hospitality and tourism team has a working knowledge of the industry which, when combined with our technical knowledge, can assist you in reaching your commercial goals.
By staying on top of changes in the manufacturing sector, our industry experts provide relevant and timely guidance to a broad range of manufacturing business.
Our mining and energy team has the experience and resources to help start-ups, developing businesses and well-established companies to meet their commercial goals.
Integrity and transparency are at the heart of the best Not for Profit organisations. These values re shared by our dedicated Not for Profit team, which helps entities to establish to improve performance and develop strategies for long-term growth.
Our advisors understand the challenges and opportunities facing the professional services sector first hand. This experience together with our expertise helps to determine your strategic objectives and provide concise, relevant advice to help you achieve your goals.
Our property and construction team assist on a wide range of assignments from property development to construction and large infrastructure projects. Their diverse experience, technical expertise and commercial know-how to help you tackle the important issues.
Our retail and wholesale team works with a variety of businesses from family owned operations to franchises and larger chains, to provide advice and guidance on the issues that count.
Our transport and distribution team works with businesses to review their operations, improve efficiency and productivity and ensure compliance with the latest regulatory developments.
The William Buck Health Hour could be the most profitable hour you spend this year.
We work with individuals, businesses and community organisations with a particular focus on the mid-market. Drawing on our extensive experience, our advisors will challenge your thinking and re-frame problems to understand their root-cause.
We’re more than just accountants and advisors, we aspire to create positive change in the lives of our clients and our people.
Life as a CFO can be complex, exciting and demanding. Combining technical excellence with decades of working closely with and listening to the needs of CFOs, our advisors understand the competing demands of your role.
Whatever your needs, we have the expert resources to create the best outcome for you and your business. As our client, you’ll benefit from our integrated services model that puts you at the core of its business.
We create and implement personal wealth plans and tax strategies that give our clients greater certainty that their financial and personal goals will be met.
Send us a quick message to see how we can change your life.
Full of practical advice, news, opinion pieces and tips designed specifically for CFOs. Join the conversation today.
Our professionals are experts in their fields and are skilled at providing jargon-free, practical and comprehensive advice, allowing you to get to the heart of your matter.
Interested in joining our team? We have positions across Australia and New Zealand for forward thinking, enthusiastic, intelligent individuals.
Looking to join a team that offers more than just co-workers? We’re proud to have built a firm which engenders loyalty and provides an environment in which life-long professional connections and friendships can flourish.
Are you ready to achieve your career goals?
We offer a workplace where striving for excellence and being supported to achieve your professional and personal best, are par for the course.
Are you a proactive and innovative accounting professional interested in joining our team?
We foster a dynamic and respectful work culture, where growth and development are encouraged, and initiative is rewarded.
We’re committed to recruiting outstanding people. Our culture is built on respect and team work, making William Buck a great place to develop a rewarding career. From day one, you will be given every opportunity to realise your full potential.
We boast a culture that values each individual employee as an essential part of the team and places a high priority on helping you reach your full potential, personally and professionally.
Hello. Kia Ora. Talofa. Ni Ho. However, you say it, there’s always a warm welcome at William Buck. Creating an enjoyable environment to spend our days is part of our master plan to create an exceptional place to work.
Applying for a graduate position at William Buck is the first step in a rewarding career.
Our people are the reason for our success. In recognition of this we have comprehensive learning and development programs to ensure our employees are given the right opportunities to grow both as professionals and as people.
Interested in joining our team? Take a look at the answers to some of our most frequently asked questions.
Applying for a role at William Buck is the first step in a rewarding new career.
Here you’ll find the latest business news, thought leadership articles, technical updates and tools to help drive your business performance.
Check out our latest research reports, looking at the key trends and issues faced by the mid-market.
A dedicated area for our Wealth Advisory clients to provide information about their portfolio services.
Our dedicated client portal enables you to share files with your advisor, manage your portfolio and make payments.
The William Buck Tax Rates and Tools App is available for download today.
Check out some of our latest insights and news appearances on our dedicated video channel – William Buck TV
In just one hour our experienced business advisors can prepare an independent assessment of your business through analysis of the key fundamentals of successful growth; your business, your finance and your people.
Check out our latest news articles, looking at the key trends and issues faced by the mid-market.
Sign up to receive the latest insights relevant for your business.
Take a look at our latest research reports.
Packed full of useful features, our free App can help you.
Established in 1895, we’re more than just advisors; offering a full range of services and 360 degree support, we aspire to create a positive change in the lives of our clients and our people.
As a member of Praxity, the world’s largest international accounting alliance, our local team is supported by our extensive network, representing an unrivalled global resource and knowledge pool.
From Western Australia, to New Zealand; and everything in-between; check out our offices, and local team, representing an unrivalled global resource and knowledge pool.
On 22 October the Treasury released it’s Consultation Paper on Division 7A. The paper proposed a number of amendments as shown below..
The maximum term of a loan will be 10 years. Consistent with current practices, the loan effectively begins at the end of the income year in which the advance is made. This is because the taxpayer is given until the lodgment day (the earlier of the actual date of lodgment or lodgment due date) of the private company’s income tax return to repay the loan or put it on complying loan terms.
The minimum yearly repayment amount consists of both principal and interest:
Where the minimum yearly repayment has not been made in full, any shortfall will give rise to a deemed dividend for the year. This is consistent with the current laws.
Repayments of the loan made after the end of the income year, but before the lodgment day for the first income year are counted as a reduction of the amount owing – even if they are made prior to the loan agreement being finalised.
This loan model is preferred from a policy perspective as annual payment encourages proactive cash flow management by businesses and reduces the size of payments (ten smaller payments) relative to the Amortisation Model in the Board of Taxation report. It’s also easier to calculate the required interest and principal repayment amounts than under the Amortisation Model.
Similarly, although an interest-only model is simple in operation, it’s not consistent with the policy intent behind Division 7A which requires repayment of principal over time. This is because there is an expectation that amounts borrowed from private companies will be returned over time to shareholders as dividends and taxed at the shareholders’ marginal tax rates.
The removal of the 25 year loan option will create a limit on the type of investments private businesses can finance under Division 7A’s revised ‘ten-year loan model.’
The annual benchmark interest rate will be the Small business; Variable; Other; Overdraft Indicator lending rate most recently published by the Reserve Bank of Australia prior to the start of each income year.
The existing benchmark interest rate is the ‘Loans; Banks; Variable; Standard; Owner-occupier indicator lending rate published by the RBA which currently is 5.2%. The modified benchmark interest rate would be 8.3%.
There appears to be no rationale to support increasing the benchmark interest rate to 8.3% in the case of the ten year loan model, where the loan is being repaid progressively over the term of the loan. This can be contrasted with the interest only terms under a model proposed by the Board of Taxation. This is not a change that simplifies the law. The change would only increase the cost to shareholders in private companies who are accessing funds in those companies.
Currently a written loan agreement needs to be put in place before the lodgment date. This is an administrative burden, but one that most advisors are now well practiced at managing. Replacing loan agreements with only having to evidence entry into a loan arrangement and its terms is a step backward.
A preferred alternative – that would also be a simplification from the current situation- is for advances made by a private company to a shareholder (or associate), to automatically fall under the 10 year loan model unless the parties can evidence a contrary intent, i.e. an opt out approach.
Interest is calculated for the full income year, regardless of when the repayment is made during the year (except Year 1). If the loan is paid out early, that is before Year 10, interest will not be charged for the remaining years of the loan.
There is limited rationale for this approach on interest calculations. The interest on Division 7A loans should be calculated on a commercially realistic basis, not in the artificial way that is being proposed.
Most private company groups are accustomed to dealing with commercial loan arrangements.
Under the proposed approach, an advance repaid on 1 July would attract a full year of interest – this is not justifiable.
If this proposed change is adopted, there will be a significant need for pre-planning by any private company groups making any loans to shareholders/associates.
All complying 7-year loans in existence as at 30 June 2019 must comply with the new proposed loan model and new benchmark interest rate to remain complying loans, but will retain their existing outstanding term.
For instance, a loan maturing 30 June 2021, will continue to mature on this date. This means that under the transitional rules, its remaining term will be 2 years. The outstanding loan balance would be repayable over 2 years, and interest would be charged using the new benchmark interest rate under the proposed model.
Current loan agreements with written reference to the benchmark interest rate should not be required to be renegotiated under this option.
All complying 25 year loans in existence as at 30 June 2019 will be exempt from the majority of changes until 30 June 2021. However, the interest rate payable for these loans during this period must equal or exceed the new benchmark interest rate.
On 30 June 2021, the outstanding value of the loan will give rise to a deemed dividend unless a complying loan agreement (10 year loan model) is put in place prior to the lodgment day of the 2020-21 company tax return. The first repayment will be due in the 2021-22 income year.
Where the existing 25 year loan has a longer remaining term, (greater than 12 years) there’s potential for material financial impact with the implementation of this change.
Businesses and shareholders have made long term investment decisions based on tax laws that permitted a 25 year loan. Any change in the tax laws needs to have strong regard to the impact on the investment decisions that have been made.
A preferred approach would be to allow an option for existing 25 year loans to remain in place based on their current terms
Old s108 loans
Old s108 loans (being loans that pre-date the introduction of Division 7A in 1997) will become subject to Division 7A. Commencing from 2022, these loans will need to be repaid based on the 10-year loan model.
Under the transitional rules, pre-1997 loans will be taken to be ‘financial accommodation’ as at 30 June 2021. The taxpayer will have until the lodgment day of the 2020-21 company tax return, to either pay out the amount of the loan or put in place a complying loan agreement, otherwise it will be treated as a dividend in the 2020-21 income year. The first repayment will be due in the 2021-22 income year.
Treasury, like the Board of Taxation, seem clear in their view that these loans need to be brought into the Division 7A system. The stated rationale for the change is weak. The real rationale would appear to be a desire to have all taxpayers on the same footing in relation to loans from private companies.
Against the proposed change is the view that the change is effectively retrospective, as these loans were made in compliance with the terms that existed at the time.
But there is also a perception that these loans should be brought to tax at some point in time – many of these loans will have been outstanding for over 20 years with no repayments being made or interest charged. Left to the taxpayer, it is doubtful that many of these loans will be repaid any time soon.
An extended transitional period is warranted if this these loans are brought into Division 7a, so that the financial impact on affected taxpayers is manageable.
These statements are made in the consultation paper.
Caution should be exercised before proceeding on the basis that a loan has become statute barred. This is a complex legal question where the rules vary between States, and where the interaction with Division 7A is potentially flawed resulting in the intended outcome not being achieved.
Forgiving a loan
The forgiveness of a loan that has previously been deemed to be a dividend does not give rise to a further deemed dividend. This is the case even if the first deemed dividend was reduced (due to the distributable surplus rules) or where the deemed dividend was never included in the shareholder’s tax return and the amendment period has now expired. The proposed change would require that the deemed dividend was actually included in the shareholder’s tax return for the subsequent forgiveness of the debt not to trigger further Division 7A implications.
However, section 109G sets out a number of exceptions to this general rule. In particular, subsection 109G(3) provides that a forgiven debt will not give rise to a dividend if the loan that resulted in the debt giving rise to a deemed dividend under section 109D.
Subsection 109G(3) will be amended to ensure this exception only applies where the earlier dividend that the company was taken to have paid has been taken into account in the income tax assessment of an entity or entities.
It would seem reasonable to tax windfall benefits, such as where a taxpayer fails to include an earlier deemed dividend in their tax return.
However, where the loan arose in circumstances where there was no distributable surplus, it would suggest that there were no profits in the company so the policy of Division 7A (shareholders accessing profits of private companies without paying appropriate tax are personal marginal rates) would not appear to be offended. This change may not be warranted in these circumstances, or the change may only be appropriate to apply to loans created after the distributable surplus concept is removed (which is one of the proposed changes).
Non-resident private companies
Division 7A applies to payments, loans and forgiven debts by private companies regardless of the residency or place of incorporation of the private company. This leads to an unnecessarily complex analysis for some taxpayers as Division 7A, in theory, deems a dividend to arise to a non-resident shareholder that receives a loan from a non-resident private company, that has no Australian sourced profits or Australian based assets. It’s only through recourse to other parts of the tax laws that this scenario does not result in taxable income arising.
Some stakeholders have highlighted that the application of Division 7A to non-resident private companies in certain circumstances continues to be uncertain – for example: whether it applies only where the shareholder of the private company (or their associate) is an Australian resident, how ‘source’ considerations apply to the deemed dividend and how the provisions potentially interact with the transfer pricing rules and double tax treaties.
Division 7A should only apply where, had a dividend been paid in the same circumstances, the shareholder/associate would have been assessable on the dividend. This would require that the shareholder/associate is an Australian tax resident.
Currently a Division 7A deemed dividend is limited to the distributable surplus of the private company. Distributable surplus is a proxy for profits, although it is poor proxy in many cases. The proposed change is to apply Division 7A to the economic benefit received by the shareholder/ associate. This would be achieved by removing the concept of a distributable surplus.
This will ensure the integrity of Division 7A so that dividends can be deemed for the entire value of the benefit that was extracted from the private company.
This will also align the treatment of dividends with section 254T of the Corporations Act 2001 (Cth) which allows dividends to be paid out of both profits and capital.
This change may appear more of an issue than what it truly is.
Reliance on the absence of a distributable surplus to argue no Division 7A deemed dividend can often by misplaced as the interposed entity provisions could have application (where did the no distributable surplus get the funds from in order to make the loan?).
Safeguards will be needed to ensure distributions of share capital are not deemed to be dividends.
The section 254T rationale is flawed. Alignment with the Corporations Act position is not achieved.
Unpaid present entitlements
The ATO’s interpretation of the Division 7A treatment of UPEs changed in December 2009. From that time, the ATO’s view became that UPEs are loans for Division 7A purposes. Any question over this treatment will be addressed by the proposed change which will legislate that UPEs are to be treated consistent with loans for Division 7A purposes.
All UPEs that arise on, or after, 1 July 2019 will need to be either paid to the private company or put on complying loan terms under the new 10-year loan model prior to the private company’s lodgment day, otherwise they will be a deemed a dividend.
Particular care will be needed in dealing with specific asset sub-trusts. Greater transitional measures may be required in relation to these arrangements. This is one of the questions raised in the consultation paper.
Whilst it’s raised as a question in the consultation paper, it is difficult to see a situation where pre 2009 UPEs will be excluded from Division 7A but all other UPEs and all loans will be included.
One of the areas where UPEs were most frequently used was to allow a trust that operated a business to retain funds for working capital purposes where the funds were only taxed at the corporate tax rate.
Although exceptions in tax laws tend to create complexity, an exception may be warranted for pre 2009 UPEs where the funds have been applied for income producing purposes – i.e. an otherwise deductible rule.
Private groups with pre 2009 UPEs will need to start planning for these proposed changes.
Self correction of errors
The existing restricted mechanism for correction of errors in prior year Division 7A positions will be removed and replaced with an expanded self assessed correction mechanism.
To qualify for self-correction, the taxpayer will need to meet eligibility criteria in relation to the benefit that gave rise to the breach. The eligibility criteria will require that:
Under this approach, in order to self-correct an eligible taxpayer must:
In certain cases, the concept of self-correction may include other appropriate action considered reasonable by the Commissioner based on the taxpayer’s circumstances. Reasonable circumstances would be set out by the ATO in its public advice and guidance products.
The correction mechanism required an exercise of discretion by the Commissioner, rather than self-assessment.
Further, the grounds on which the Commissioner could exercise the discretion were quite narrow.
Period of review
A 14 year amendment period is being proposed for Division 7A. This is based on the 10 year loan term plus the standard 4 year amendment period.
This approach is consistent with other areas of the law in which there are an extended period of review, including capital gains tax and loss recoupment rules.
This change would enable the full loan period to be reviewed and would curtail situations where a taxpayer escapes the application of Division 7A by being outside the 4 year amendment period.
This proposed change would support a “opt out” basis for implementing the 10 year loan model.
Private use of assets
The use of assets of a private company by shareholders or their associates will be a payment (by definition) for Division 7A purposes. The amount of the payment is the market value of the usage, which can be difficult to ascertain. It is proposed that a safe harbour formula will be included in the legislation.
The safe harbour will generally apply unless the taxpayer has received a non exclusive right to use an asset.
The proposed formula for the safe harbour is:
A = Value of asset at 30 June, for the income year in which the asset was used.
IR = benchmark interest rate plus 5 per cent uplift interest.
Days used = days shareholder (or their associate) used or had the exclusive right to use the asset.
Days in year = days in income year (i.e. 365 or 366).
The safe harbour will provide that:
The shareholder (or their associate) can avoid a deemed divided by ensuring that an arm’s length amount for usage is paid.
The determination of this arm’s length amount in some cases can be difficult to ascertain and increases compliance costs for taxpayers.
The Board of Taxation recommended the design of legislative safe harbours to facilitate compliance, reduce uncertainties and lower administrative costs for taxpayers. It was also suggested that the rules should distinguish between appreciating and depreciating assets.
However, this rule currently does not address the case where an entity receives a valuable non exclusive right (i.e. where the provider maintains a right to use the asset). In this case, while a payment will be taken to be made, the time at which the payment is taken to be made is ambiguous. This is an unintended anomaly.
Loans made in the ordinary course of business
Loans made by a private company in the ordinary course of its business are excluded from Division 7A. There has been some ambiguity over the scope of this exception: for example, does an internal group finance company fall within these rules? The confusion is compounded by recent ATO guidance on when a company will be considered to be carrying on a business. The proposed amendments will limit the scope of the exception to the generally accepted position, being that it only applies to private company that make loans in the ordinary course of a business of lending money to third parties.
Section 109M was intended to operate so that a private company will not be taken to pay a dividend only in circumstances where the loan is made:
It is noted that the ATO has recently updated its guidance on when a company carries on a business and that this may have flow-on effects for the operation of this provision.
Interposed entity rules
The interposed entity rules are an integrity rule within Division 7A to capture loans or payments made indirectly (via other entities) from a private company to a shareholder or associate. The proposed amendment would strengthen the tests for when the interposed entity rules could be applied.
This change ensures the provision gives effect to the underlying policy intention to bring to account indirect benefits, even if the payment or loan that results in the indirect benefit also has other commercial purposes.
We would suggest that the interposed entity rules are a component of Division 7A that requires greater review and amendment to reduce its complexity.
The interposed entity rules are already an incredibly broad set of rules. They capture numerous factual situations that do not offend the policy of Division 7A, and it is only through the basis on which the Commissioner will make a determination to apply the rules that these situations don’t give rise to deemed dividends
Shareholders and associates of private companies can often have multiple relationships with the company, such as being both shareholders and employees. The interaction of Division 7A and FBT in relation to benefits provided to these employee/shareholder situations is key. The proposed amendments will clarify some aspects of these interactions.
These amendments will clarify and provide integrity in relation to the interaction between Division 7A and the FBT provisions.
The proposed changes include an amendment to confirm that deemed dividends are not tax deductible.
Currently, payments, loans and other benefits that give rise to a deemed dividend are not deductible, but this is not specifically addressed in the legislation.
Posted By William Buck News on 20/02/2019 05:59:16 am
Welcome to our first NFP update for 2019. There are many changes afloat at present which impact governance and financial reporting for the sector. A…
Posted By William Buck News on 20/02/2019 12:47:07 am
Former Guide Dogs manager convicted A former general manager of Guide Dogs Victoria submitted false invoices for home improvements and has pleaded guilty to three…
Posted By William Buck News on 20/02/2019 12:33:25 am
Charities and politics With federal and NSW elections only months away, some charities might plan to campaign on political issues. The ACNC’s guidance on election…
Posted By William Buck News on 20/02/2019 12:02:11 am
Amendments to Australian Accounting Standards – Right-of-Use Assets of Not-for-Profit Entities Under the current drafts of AASB 1058 Income of Not-for-Profit Entities and AASB 16 Leases,…