Corporate Tax Accountants: directory of firms

The lower company tax rate is not a status a company keeps. It is tested each income year against that year's aggregated turnover and that year's income mix. A trading company that sells its operations and then sits on investments can move from the lower rate to the full rate without doing anything else differently.

The passive income limb catches more than people expect. Base rate entity passive income includes interest, rent, royalties, most dividends and net capital gains, and it traces through partnership and trust distributions. Getting the classification wrong changes the rate applied to the whole taxable income, and it also changes the rate at which dividends can be franked.

A loan from a private company to a shareholder or an associate is treated as a dividend unless it is repaid or made a complying loan by the company's lodgment day. A loan for these purposes includes credit and anything that is in substance a loan of money, so a director's loan account that drifts into debit counts.

To comply, there must be a written agreement in place before the lodgment day, an interest rate at least equal to the ATO's Division 7A benchmark rate for each year, and a term of no more than seven years, or 25 years where the loan is fully secured by a registered mortgage over real property meeting the ATO's value test. Minimum yearly repayments must then be made by 30 June each year; a shortfall is treated as a dividend in that year, and a deemed dividend under Division 7A is unfranked.

ASIC sends each company an annual statement around its review date, with an invoice for the annual review fee. The fee is due by the date on the statement, usually two months after the review date. Company details must be kept current, with changes notified within 28 days of occurring, and anything not already updated must be fixed within 28 days of the review date to avoid late fees.

Directors must also pass a solvency resolution within two months of the review date, unless the company lodged a financial report with ASIC in the past 12 months. Separately, every director needs a director identification number, which is applied for personally through the Australian Business Registry Services and stays with the individual for life.

Work starts from a reconciled trial balance: bank and loan accounts agreed, intercompany balances matched to the other side, stock and work in progress counted, payroll liabilities tied back to what was paid. The accountant then prepares the financial statements and the tax reconciliation between accounting profit and taxable income.

Loan accounts and dividends are dealt with before the lodgment day, because Division 7A is decided by that date. Minutes and dividend statements are signed at the time, not reconstructed later. The return is lodged and the instalment rate for the following year updates to reflect it.

PAYG instalments for most companies fall due 28 days after the end of each quarter, and they are a prepayment of the year's expected tax rather than a separate tax. Varying an instalment is possible when the year is running below expectation, but the variation has to be defensible.

The year also has fixed points that do not move with the tax calendar: the ASIC review date, which is tied to registration rather than to 30 June, and the lodgment day for the company return, which is the date Division 7A arrangements must be settled by.