It’s going to be a challenging year for SMEs, as complex shifts in tax law and their interpretation will mean practitioners will be under pressure to keep up with significant change, says previous SA Chair of The Tax Institute SA, Leo Efthivoulou, Director of ENA Law, CTA, CA, LLB, BCom (Acc).
Currently the director at ENA Law and founding director of Law Link Group, Leo has over 13 years’ experience in law, including holding senior positions across KPMG Law and Cowell Clarke. Leo helps clients around Australia by putting his unique commercial and tax law lens over cases, whilst leveraging a commercial, practical and savvy mindset.
With The Tax Summit fast approaching, Leo explains how new rules and regulations, which are being rolled out and enforced, will significantly impact the industry, and shake up traditional methods of tax practice.
Tax Implications for SMEs, what’s next?
Leo believes that as we continue through 2020, specific anti-avoidance provisions will continue to be scrutinised and applied with even further rigour.
“Directors potentially being liable to more unpaid tax related liabilities are the biggest change we’re going to see this year. Employment-related practices and consequences are a focus of the media on a daily basis and will be another 2020 challenge,” Leo says.
“The thing not addressed by reform, which will be an ongoing tax challenge for SMEs, is conceptually understanding why the laws and their application are so confusing – combined with clients understanding the value in obtaining advice,” he continues.
Top Hatting, fan or foe?
Corporate restructures are becoming increasingly intricate, with more SME clients embarking on their next stage of growth, and many holding onto the ultimate goal of listing on the ASX. This means debate is heating up around the pros and cons of Top Hatting, asset protection and succession planning, along with issues like capital injection by investors and the role of investment advisers.
The concept of Top Hatting is one Leo supports; he believes a taxpayer’s structure should grow organically with the business itself without impeding transactional costs. That is going to be one of the hot talking points of this year’s highly anticipated Tax Summit, he says.
“I’m really looking forward to Session 5.1, delivered by Chris Ardagna, Partner at Pitcher Partners, which will uncover the practicalities and implications of SME business structures involving multiple owners and flexible profit sharing,” he explains.
“I’m also looking forward to the ATO’s views on back to back rollovers in Session 12.1, which will be delivered by Dung Lam, CTA, and Annelise Jeromela, FTI, both from Coleman Greig Lawyers.”
“Getting around the social activities is also a must!”
What does the future hold for tax in Australia?
On the future for tax in Australia, Leo says the opportunities being created as a result of deviations, changes and developments to tax are great. This, he highlights, has been the case for several previous years.
“Meanwhile Division 7A, Structuring for professional practices and dealings with trusts will continue to be trending topics,” he adds.
Amidst all the changes, Leo thinks there are three urgent matters in need of address by the tax reform. Firstly, being competitive against other jurisdictions on an effective tax rate. Secondly, encouraging industry growth, population growth and ‘life satisfaction.’ Finally, the complexity of the tax laws and the need for simplification – ultimately reducing the work.
“Any reform to minimise risk and maximise productivity will take several years, and most likely won’t all happen just over the coming year,” Leo concludes. “Therefore, serious reform should be contemplated during 2020 and be implemented in 2021 for the benefit of years to come.”
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