Big end of town issues affecting SMEs
WA Tax Forum
The Tax Institute
Executive Summary and Issue-Spotting Map
This paper equips SME and private-wealth advisers to identify when "big-end" corporate tax rules affect their clients and when to escalate to specialist advice. The five regimes covered are: Debt Deduction Creation Rules (DDCR), thin capitalisation, transfer pricing, hybrid mismatches, and taxation of financial arrangements (TOFA).
This paper is practical, rather than technical, and aims to give practitioners tools to help manage an Australian Taxation Office (ATO) review and / or “issue spot” with clients either as part of normal work practice or ahead of a review or audit.
The paper is structured into the following:
definitional – what does the ATO mean by “public groups”, “small business”, and “private wealth”;
“big end” audit approaches being applied in the small business and private wealth context; and
“big end” tax rules that may have application to small business or private wealth clients:
the thin capitalisation rules in Division 820 of the Income Tax Assessment Act 1997 (ITAA 1997);
the debt deduction creation rules in Subdivision 820-EAA of the ITAA 1997;
the transfer pricing rules in Division 815 of the ITAA 1997;
the hybrid mismatch rules in Division 832 of the ITAA 1997; and
the taxation of financial arrangements rules in Division 230 of the ITAA 1997.
With item 3, the paper does not “deep dive” into those rules, instead the paper will allow advisors to “issue spot” to conduct further research and investigation into the client’s affairs or to recommend specialist advice.
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