Meet the Millionaires who dont pay tax

Discussion in 'Accounting & Tax' started by XBenX, 20th Apr, 2017.

Join Australia's most dynamic and respected property investment community
Tags:
  1. XBenX

    XBenX Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    112
    Location:
    Syd
    I was reading this article and I was wondering what the possible reasons for having such large accounting / tax preparation fees could be?

    Is there a strategic reason I am missing?

    How 48 millionaires who pay no income tax, not even the Medicare levy

    Caught by the ATO previously (GIC, etc could be part of this dedn)
    Agent charging a % of tax saved?
    Wage earners create own accountancy firm - convert wage based income to 30% tax (good luck with IVA here?)
     
    Perthguy likes this.
  2. Redwing

    Redwing Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    7,431
    Location:
    WA
    Look at businesses also, IKEA, Apple, Google, Amazon, Uber, Airbnb, etc
     
    Foxy Moron likes this.
  3. thesuperman

    thesuperman Well-Known Member

    Joined:
    26th Jun, 2015
    Posts:
    460
    Location:
    Australia
    I'd be interested in learning exactly how they are doing that
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    41,667
    Location:
    Australia wide
    Deductions and gifts and losses.

    The high cost of managing tax affairs probably includes a lot of legal fees for court cases involving tax disputes.
     
  5. datto

    datto Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    6,675
    Location:
    Mt Druuiitt
    If my accountant charges me $50K each year to prepare/lodge a return and then every Xmas he gives me a 40K gift, would that raise any eyebrows?
     
    legallyblonde and hobo like this.
  6. Tink

    Tink Well-Known Member

    Joined:
    3rd Aug, 2015
    Posts:
    156
    Location:
    Australia
    its a rebate :D
     
    datto likes this.
  7. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    41,667
    Location:
    Australia wide
    He would then be paying your tax as his income is increased by $50k
     
  8. XBenX

    XBenX Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    112
    Location:
    Syd
    That's what I thought Terry - but I was wondering if that was the case wouldnt you add that to the press release from an ATO perspective?

    These people tried to pay no tax, we have sophisticated methods of identifying individuals who try to do this. In the end they didnt pay tax - but they didnt come out in front, they just increased the cost of managing their tax affairs. This is a lose lose situation. Dont bother.

    Is there any other scenarios other than the one above that could be strategic?

    Ie Why do they have such a high cost of managing tax affairs - because they tried to push the envelope and the ATO caught them out (this is where I got to first) or is there another why behind this high cost of managing tax affairs.

    I cant think of any that are all that plausible.


     
  9. Mike A

    Mike A Well-Known Member

    Joined:
    24th Jun, 2015
    Posts:
    2,656
    Location:
    UNIVERSE
    Its entirely possible but not for the average bear.

    Let's say you own Tetrapack and distribute throughout Australia. Manufacturing is done in Philippines in an economic zone where tax rate is zero.

    Australia and Philippines has a double tax treaty. All costs are incurred in Philippines and a transfer pricing review is done and it is determined cost plus method appropriate with a markup of 15% to be applied. Transfer pricing done and complies with legislation.

    you have now transferred 15% of profits from Australia to Philippines. tax saving from 30% to 0% on 15% of profits.

    Now you need a permanent establishment in the Philippines for this to even be feasible. So sometimes they fail to outline the fact these companies have significant venture elsewhere. Australia may merely be a distribution channel. One of many.

    So yes possible and as Kerry Packer once said you would be a fool to pay anymore than you need to. Kerry Packer was a also a billionaire with many overseas interests. I doubt anyone on this forum is a billionaire.
     
  10. Mike A

    Mike A Well-Known Member

    Joined:
    24th Jun, 2015
    Posts:
    2,656
    Location:
    UNIVERSE
    Drummond v FCT says that where tax fees are excessive they are not deductible. doesnt work.

    onus on taxpayer to then work out what is reasonable and deductible as tax affairs advice.

    if a scheme to defraud the commonwealth look at potential criminal charges.
     
  11. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    23,319
    Location:
    Sydney
    I am very happy to assist any millionaires out there pay $0 tax by charging large accounting and tax advisory fees. I guess Mike, you will say the same :)
     
    Ed Barton likes this.
  12. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    41,667
    Location:
    Australia wide
    But it seems the ATO is talking about individuals here. They don't mention what tax their associated companies are paying, but it could be substantial. But that may not be the case either as many of them are going to the bother of claiming uniform allowance so you would think they would want to divert company income to themselves up to the point they are paying 30% tax.
     
  13. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    27,095
    Location:
    Sydney or NSW or Australia
    Has your Accountant taken up a 'gardening' business in your backyard? Time for a few extra cameras round your place.
     
    datto likes this.
  14. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    23,319
    Location:
    Sydney
    The media article and ATO review overlooks that sometimes a taxpayer may have numerous interests and entities and they may personally incur and pay the fees associated with the family group entities. The obvious reason being overall control and co-ordination as well as the individual seeking to obtain the best tax benefit at the higher marginal rate. A basic example may be a company Director paying the fees for the business. There are specific tax laws that even allow a Director a deduction in some cases for paying company expenses. (ie a Director penalty notice for unpaid super / PAYG)

    This should never be assumed as permitted as in some instances a nexus between income production and the expenses may not be available. (eg If the income was in the Phillipines through a Phillipines entity as Mike says and no AU income is earned) Hence no deduction or a partial deduction. And it may be difficult to ascertain the extent of deduction. Thus none may be deductible.
     
    Mike A likes this.
  15. Mike A

    Mike A Well-Known Member

    Joined:
    24th Jun, 2015
    Posts:
    2,656
    Location:
    UNIVERSE
    @Paul@PFI

    interesting fact. Drummond v FCT was due to fees paid to a certain Mr Bonnell. haha
     
  16. datto

    datto Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    6,675
    Location:
    Mt Druuiitt
    I wonder if Drummond got his 50K back. Or did someone end up floating down the river lol.
     
  17. hash_investor

    hash_investor Well-Known Member

    Joined:
    11th Oct, 2015
    Posts:
    2,439
    Location:
    Sydney / Canberra
    He will also be claiming the cost of gifts. His taxable income will not increase.
     
    Mike A and datto like this.
  18. Mike A

    Mike A Well-Known Member

    Joined:
    24th Jun, 2015
    Posts:
    2,656
    Location:
    UNIVERSE
    @datto its worse. bonnel charged him 500k !!@
     
    datto likes this.
  19. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    23,319
    Location:
    Sydney
    Bonnell - Grrr. Donnelly (Trustee) v Windoval Pty Ltd (Trustee), Federal Court of Australia
    Not worth what was paid ? He was promoting LLCs last I saw.
    I always think of his schemes and the adage "if it seems too good to be true"
     
  20. XBenX

    XBenX Well-Known Member

    Joined:
    20th Jun, 2015
    Posts:
    112
    Location:
    Syd
    The numerous interests and entities could be a good reason given:

    "On the face of it, the figures suggest these people spent almost half of their reported incomes managing their tax affairs, a proportion so high as to raise suspicions that their actual incomes were higher"

    Thanks everyone for the discussion.