Elections have (Tax) Consequences….

By the time this article is published we will be near the finish line in the federal election campaign. As part of any election campaign there will always be talk of tax, and tax changes, that a potential new government might implement if elected. However, we have seen over the past three to four years that governments and policies don’t need to change in order for significant tax-related changes to happen. Indeed, we have two “live” examples of change happening without governments changing, without legislation changing and without our various professional bodies really saying anything about how it will detrimentally impact the dental profession.

Does the Government Need to Change to Have Tax Consequences?
The answer to this question is no and over the election campaign you will hear a lot of promises being made from both sides about helping small businesses, making it easier for small businesses to comply with the government regulations and tax, driving costs for small businesses down etc. All of these are very worthy goals and will be of great benefit to the dental profession if implemented. However, as the below examples illustrate, what the political side of government promises with one hand, the administrative side is endeavouring to take back with the other.

Example 1 is the current focus of the State Revenue authorities on the east coast on subjecting payments made under facilities and services agreements to payroll tax. No changes to legislation required, just a different interpretation of the law following the Optical Superstore case in Victoria. The entire dental profession should be watching for the consequences of the rulings coming from this in Victoria and from other cases moving through the various state legal systems which are setting some troubling precedents in line with Optical Superstore.

Example 2 is the Australian Tax Office’s (ATO) recent draft guidance on Section 100A and Division 7A in relation to trusts. We await the draft guidance being finalised by the ATO to see exactly where the final position will land on this issue. However, we note that the relevant underlying legislation hasn’t been changed since its introduction in 1979. We also note that Section 100A is only concerned with tax avoidance arrangements so the ATO is also not bound by the usual four-year limitation on audits if they decide to review your trust. So, another case of a re-interpretation of the law rather than any legislated changes being made.

What these examples highlight, and both will impact dentists to varying degree’s depending on how your practice is structured, is that we need neither changes of government, nor changes in legislation to happen, for there to be tax consequences for us.

The Takeaway
So, while thinking about who can earn your vote and the policies that are important to you, it’s always worthwhile keeping in mind that, while tax cuts are nice, and changes in tax rebates / incentives / allowances which put more money into the pockets of small business owners are all welcome, both sides have form on the board for letting the administrative side of Government slowly creep out policies like the above, to recoup the money they have given you. There truly is no free lunch!!

By Jakin Loke, Chartered Accountant and Director

This article first appeared in the May 2022 issue of the News Bulletin, published by the Australian Dental Association.

This article is designed to provide generic information only and should not be viewed as a recommendation to act or financial advice. Individuals should seek advice from a qualified adviser to ensure their actions are commensurate with their financial needs and requirements. Whilst every effort has been undertaken to ensure accuracy of information at the time of publication, the information contained within the article may have changed prior to and subsequent to the article’s publication.

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