BLOG - Accounting 101 - the very minimum you should expect from your tax accountant

Kathryn Harris, FCPA, CTA TrustOne Partners

What should your tax accountant be doing? What is your responsibility? How do you know if they've got it right?

BLOG - Accounting 101 - the very minimum you should expect from your tax accountant

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We get customers approaching us from lots of different firms and it amazes us at some of the things other accountants do (or don’t do!)

If it sounds too good to be true – it’s probably tax evasion or fraud

A new client recently had been advised by his previous accountant that by making other relatives or other people as directors of his company he could avoid liabilities.

While on paper it is the director that is responsible the corporations act actually recognises that a person is a director even if their name is not on the bit of paper. If you essentially have control of the company you are a director.

It’s also important to recognise that for many areas that group companies if the directors are considered to be related parties then the companies will still be grouped and taxed as a whole. Payroll tax and workcover are areas where this applies.

Superannuation is for funding your retirement – not starting a business

Another client recently had an advisor tell him he could set up a self managed superfund, roll his super in an industry fund into it then loan it to a company to start a business.

Straight from the ATO:

“An SMSF must be run for the sole purpose of providing retirement benefits for the members or their dependants. Don't set up an SMSF to try to get early access to your super, or to buy a holiday home or artworks to decorate your house. These things are illegal.”

While there are circumstances where a super fund can loan money there are very strict rules around it. Remember – whatever investment a self managed super fund makes it must meet the sole purpose test of providing retirement benefits for its members.

What? I have to pay that much??

The latest client to walk through our door had been seeing another local accountant for a few years. Suddenly he has to pay $10,000 in tax – substantially more than ever before. When he asked why the accountant said that it was from the information he gave them.

If you make money you pay tax – that’s a no brainer. The idea of a tax accountant is to ensure you only pay the most you legally have to.

On reviewing the Financial Statements it became obvious where the problem was. There had been a lack of reconciliation between the balance sheet and the profit and loss – accounting 101.

The moral of these stories is make sure your accountant has the right qualifications and is a tax or SMSF specialist (Chartered Tax Advisor, RG146 Qualified and ASIC licenced for super ), is a member of a professional body (CPA Australia, Institute of Chartered Accountants, Institute of Professional Accountants) and is happy to answer your questions.

At the end of the day it is your responsibility to ensure the information you provide to statutory bodies like the Australian Taxation Office is correct – make sure you understand your obligations and reports and get the correct advice.

Kathryn Harris, FCPA, CTA TrustOne Partners

Kathryn is a small business advisor and tax specialist. She is passionate about helping small business owners work smarter.