Tax and duties lawyers - Stacks Law Firm
Understanding the complex laws around tax and duties can be challenging. Stacks will step in to protect and advise you in all matters related to your business and government authorities, including helping you resolve any taxation disputes.
Taxation issues frequently arise in the course of dealing with other matters. For example, if we act for a developer who is buying land and then on-selling to builders, there may be the opportunity to make use of the margin scheme under the GST legislation, thereby reducing the overall tax payable and thus the ultimate cost of homes to consumers.
Many taxation related issues like the sale of a 'going concern' arise time and time again in the course of a transactional legal practice, along with other less common tax and duties issues. Seeking legal advice can be extremely beneficial to ensure that in the course of your business transactions you minimise your tax liabilities. We can advise you in all matters related to your business and government authorities, including potential disputes.
Our approach to these matters is to combine expertise with common sense so that you can make the decision which is best for you and your business, and so that you don't spend more in legal fees than is sensible having regard to the amount of tax or potential tax involved.
At Stacks Law Firm we have a commercial users group which meets regularly, consisting of the commercial lawyers across our network of offices. In addition, we have a conveyancing users group which also meets regularly. The advantage to you is that the legal professional handling your matter, in addition to his or her own personal experience, has access to the knowledge and experience of each member of these groups.
Section 25A of the Income Assessment Act
If a developer is buying land purchased by the landowner before 20 September 1985 (and thus potentially exempt from Capital Gains Tax), it will be important to know whether the proceeds of sale will be caught by Section 25A of the Income Tax Assessment Act 1936.
Section 25A imposes income tax on any profit on land acquired by the landowner for the purpose of profit-making by sale, and also on any profit arising from the carrying on of any profit making scheme. If the landowner didn't buy the land for the purpose of profit-making by sale (e.g. the property was acquired for its long-term rent returning potential) then it becomes rather important to decide if the land is to be sold as a single lot or if it is to be subdivided by the landowner.
If the latter, a question will arise as to whether this is a profit-making scheme or, alternatively, simply the best realisation of a capital asset. The first alternative attracts income tax, the second does not.
If it can be established that there will be no tax payable by the landowner, obviously the developer is in a position to negotiate a lower purchase price.
Businesses sold as a ‘going-concern’
If a business is sold as a 'going concern' there will be no GST payable. Under the GST legislation there are a number of tests which must be satisfied for a business to be sold as a 'going concern', including:
- There must be supply to the recipient (the purchaser) of all things necessary for the continued operation of the enterprise
- The vendor must carry on the enterprise until the date of completion of the sale
However, the GST legislation contains specific definitions of 'supply', 'recipient' and 'enterprise'. Tax law is never simple, because those who draft the legislation are trying to be absolutely precise to avoid any loopholes which can be exploited.
Assistance with investigations/prosecutions and dealing with the ATO
In practical terms, investigations by the Australian Taxation Office (ATO) will be generally handled by your accountants. However the ATO is not above the law. Just because their office has adopted a policy that a particular type of transaction will be treated in a certain way as far as tax is concerned, does not mean that they are right. There are any number of cases where the courts have not agreed with the view put forward by the ATO.
If a business simply fails to disclose income or understates the income and it is caught out, there is little we can do other than appear in court and draw to the court's attention matters such as the firm's prior good record as a taxpayer.
If, however, the ATO disagrees with your accountant as to the taxation consequences of what you have done, then it is worth taking legal advice. Your accountant may be right. It may be worth pursuing the matter in court, depending upon the amount involved.
It is not unusual for such disputes to be settled out of court on a compromise basis by the ATO. From time to time it has become apparent that the office is keen to resolve matters because it has a backlog of disputes.
Conducting a tax audit
You don't have to wait until the ATO walks in the door to conduct a tax audit. If you are uncertain as to the correct tax consequences of a certain action or proposed action, you can apply to the ATO in advance for a ruling. As long as you provide accurate and complete information to the ATO, that ruling will be binding on them.
This is not a step which should be taken too lightly. There is significant cost in preparing an application for a ruling. There is always delay at the ATO as the original processing officer and his or her superiors consider the matter and there are likely to be requests for additional information which causes additional delay and cost. However, in an appropriate case, the ability to obtain a ruling can be of enormous value. The right ruling may save you a lot of tax and enable you to sleep more soundly than would otherwise be the case.
The same principles apply so far as the NSW Office of State Revenue (OSR) is concerned regarding stamp duty.
Need advice about tax and duties? Call us today
