You may change the tax rules, but we will still find the loopholes!

Aaahh … Federal Budget week. It always brings so much joy to accountants throughout Australia. Why? Because you matter who is in Government & no matter how long they have been in power, they always feel that there is a need to tinker with the tax rules.

FBT, CGT, GST, Simple Super, Simplified Tax System, Consolidation, Personal Services Income, Investment Allowances, Senior Australians Tax Offsets, highest marginal rates, rebates … the list seems to go on & on.

And when they tinker with the tax rules, there is always one common denominator and that is that these changes always bring more work to accountants around Australia.

Legislation changes also seem to provide an opportunity for the “boring number crunchers” to show their “creative flair” to try and create a loophole to get around the tax change. Every year the government changes the tax system and every year there is a new strategy that comes into play to combat. Make no mistake, the rich – or rather their accountants’ - will always find a way to pay as little tax as possible.

Even the $900 stimulus payment has strategies like co-contributing into super to make it worth $2,250. Something simple as a handout has a loophole to make it more attractive and against the grain of its original purpose.

I am seeing a number of accountants about town with a bit of a smirk this week. This is because they have heard all the whispers and leaks of dramatic changes in next Tuesday’s budget by Mr Swan. Changes to marginal tax rates, super surcharges, stopping of imputation credits, and the like. I am not really sure if it will make a lot of difference at the end of the day.

The real winner? Not the Government. Not the poor. Not even the rich. But the accountants’ bank account of course because they get to charge more and more fees as the rich still find a way to pay the same amount as before.

Why does the Government still persist in changing the laws all the time? I don’t know but I reckon they will lose some voters next Tuesday night.

If you want to see accountants cry foul at the budget … and I mean really cry foul & not pretend that they do … make tax returns no longer compulsory and give taxpayers a cheque automatically from the Government based on an estimate of their income and expenses. A budget that takes business away from accountants … I’d like to see that!

Read More......

Accountants charging "handling fees"? What a joke!

I almost choked on my dinner last night when I heard that there are accounting firms out there charging a $45 “handling fee” for their part in forwarding on the $900 stimulus payment. What on earth are they thinking?

I have been involved in accounting firms for the past 20 years & I have always hated when firms tried charging clients a “handling fee” when they get tax assessments and the like from the tax office. As the assessment goes from the ATO to the accountant’s mailbox to reception to partner back to reception & then eventually out to client, the process will take 3 to 4 days. Accountants will defend themselves and say that the ATO gets it wrong from time to time so there is a need to check the assessment. Fair enough 20 years ago when calculations were done manually. But in this day & age of computers and self-assessment, I reckon the ATO are correct in 99% of instances. So that is 3 or 4 days wasted that the client waits patiently for that cheque to arrive to pay for their rego, credit card bill or holiday. My firm has always had a simpler process where we show the client’s address as the mailing address for the ATO. We figure that if it was wrong then the client would contact me & we can sort it out then. And they get their refund cheque 4 days earlier.

So when the “Kev 07” stimulus payment got announced a few months ago there were alot of tax agents - who had their business address and trust bank account as the details for all their clients – that jumped up & down about it being wrong and how it would be a waste of administration resources during a busy time of year. So the ATO listened & told them the process to change the default address to the client direct, together with the client’s bank account. I got the notice from the ATO a few times. The ATO even placed adverts in the newspapers telling the public the same. So put simply it is nothing more than poor practice management for accounting firms to get a ream of $900 cheques arriving in their office. Yet they now have the hide to charge $45 for their poor practices??

I have also been wondering how these firms even came to the $45 figure to charge clients as well. It is hardly rocket science work, so you would be paying the pimply faced teenagers in the office to do it. Now I reckon that even an inefficient office clerk – if they are given 1000 cheques - could get a stimulus payment sent to a client, on average, every 3 minutes. So that’s 20 sent out per hour - or a handy $900 hour’s work! Pretty handy profit margin when you are paying that office clerk under $20 per hour isn’t it!!

The whole “handling fee” just reeks of poor client service (and poor understanding of the current economic situation) by these accountants. Their attempted money grab will backfire badly on them and I can assure you that they will lose alot of clients in the coming tax season. Thanks guys for sending customers our way!

What would you do if your accountant tried to pull this stint? Would you simply pay their $45 fee and shut up … or would you walk? I know what I would do!

Read More......

Why Do We All Hate The Taxman?

After talking to so many business people over the years, it is rather interesting that they all seem to have the one thing in common - they all hate the taxman.

But why do you hate the taxman?

After all, the ATO does not set the taxation rules, they simply administer them. It is the Government of the day which sets the taxation rules. On one fateful night back in September 1985, it was Paul Keating who created Fringe Benefits Tax and Capital Gains, not the taxman. It was the Howard government which introduced GST. It is not up to the ATO to abolish or remove tax legislation, but simply apply the law that is in front of them. The taxman is really no different to a policeman.

Should we get upset with the lovely police officer who issues us with a speeding ticket or thank him for save our lives by ensuring safer driving on our roads?

Shouldn't we be getting more upset with all those cash businesses that don't pay their fair share of tax? Or any tax at all?

Hands up if you know of a business that has a "cash price" that is invariably cheaper than their original price. Keep your hand up if you have dobbed that business into the taxman? I can't see that many hands up .. why not? Perhaps it has to do with the Australian way of not dobbing on your mate ... but are they really your mate if their dodgy actions mean that you are paying more tax as a result?

I love it when the taxman pounces on a dodgy character who tries to avoid paying tax.

It is the Federal Treasurer each year, in his budget speech, that sets the tax rates for the following years. Not the taxman. I am sure that if the taxman could set them himself he would reduce them to try & get a higher approval rating. He may even get a few more tickets sold to his ball each year.

If it wasn't for the taxman's efforts over the last few decades in clamping down on the wrong doers who have tried to avoid tax, then we would all be paying alot higher tax.

Did you know that when the taxman makes announcements in June of each tax year in targeting certain industries, that the average tax deductions claim falls by 23%? That is alot of cashflow savings simply by sending out a press release. Does your business have such a success rate with your cashflow when you send out a press release?

When I first started working in tax 20 years ago, I must admit that I was spooked by the taxman. I seemed to spend half the day on the phone listening to the ATO's onhold music and when I finally got through to someone, I would invariably get someone with absolutely no comprehension of the English language & would seem to be keen on simply throwing the book at anyone for getting it wrong. However in 2008, the phone calls are answered significantly quicker & the person at the other end seems alot more friendly and approachable. The internet has made it easier for accountants and business owners to access information from the ATO via its portal. Arranging a payment plan for tax is alot easier too.

Yet the public still hates the taxman and blames him for sending them bankrupt rather than look at their own inadequacy to budget and plan their cashflow for tax payments. If you make the profit then you should expect to have to pay tax. By spending all your cash on personal lavishing as nice cars & travel rather than tax is simply poor management.

I hate paying tax and agree that everyone should legitimately try to legally reduce their tax obligations with smart tax planning. But I don't hate the taxman ...

So why do you hate the taxman?

Read More......