Mind Your Business

Trusts in the crosshairs

On 23 February 2022, the ATO released its long-awaited draft ruling and guidance on the application of anti-avoidance measures relating to trust distributions, and the related flow of funds. Operators of family trusts have been put on notice to ensure trust distributions to family members are genuinely payable to those family members in order to be considered effective.

Assuming it is finalised in its present form, the ruling will change the way that many family trusts determine their distributions, particularly in a situation where there are adult children or other low-income beneficiaries. Any distributions not actually available to those beneficiaries will be attacked by the ruling.

Beneficiaries with losses Among other things the ATO has indicated that they are likely to apply audit resources to situations where beneficiaries with tax losses are made presently entitled to trust income, and the cash representing the entitlement does not flow to the beneficiaries.

The views espoused by the ATO represent a significant shift in the previously accepted norms, and trustees may need to adopt different approaches or obtain further advice in the future.

The long-anticipated ruling sets out the ATO’s views on section 100A of the Income Tax Assessment Act 1936. Section 100A was introduced in its current form more than 30 years ago by the then Treasurer, John Howard

MIND YOUR BUSINESS

By Troy Marchant, Director, Adviceco Chartered Accountants

Business insolvencies set to rise in 2022

CREDIT REPORTING COMPANY,

CreditorWatch, has released its report on business activity through January. The latest results indicate that the Australian economy is likely to recover at a slower pace than desired, with a follow-on effect of more insolvencies.

Banks and the ATO have resumed their usual collection activity, driving a steep jump in court actions by 58 per cent over the last quarter compared to the corresponding period last year. It is this figure that tells us that insolvencies will increase in 2022.

The pandemic, specifically lockdowns, has meant that Victoria and NSW are struggling more than other states.

Small business owners have been hoping for a break for years, and they’re facing even more uncertainty. So, what can they do about it? The top tip is…don’t wait! The minute you feel strain, rein in your financial support team and get cracking.

Around the table with your accountant, look at your sales data, forecast the year ahead, know what your financial options are. Invest in software that will increase your visibility of every financial decision. It will pay you later.

The business environment has forced the hand of many business owners, and that can be a very humbling experience, but the moment you get the right insight and advice could be a matter of business survival.

We recommend taking a diagnostic first step in the form of a business health check with a qualified accountant and business coach covering the details that impact your bottom line, including supply, resources, sales and marketing.

We’re not going to lie, it’ll take you a good hour to complete the AdviceCo business health check, but it could be the best hour of your career so far. It’s a document that you can complete in your own time, at no cost, and it will expose any leaks that need plugging and opportunities that can be pursued.

Troy Marchant is a Director and Business Coach at AdviceCo. To find out more about the Business Health Check, email: mail@adviceco.com.au

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