RBizz Corporate Accountants - Resources

Trust Vesting Date: Why an Old Trust Deed Could Accidentally End Your Trust

Fri, 14 Aug 2026 10:52:33 +1000

Trust Vesting Date: Why an Old Trust Deed Could Accidentally End Your Trust

Every discretionary trust has a vesting date specified in its trust deed — the date on which the trust automatically ends, regardless of whether anyone takes any action to end it. This isn't a renewable or default-extending date; once it passes, the trust vests, and the assets are required to be distributed according to the deed's vesting provisions, whether or not that's what anyone actually intended at the time.

Why This Is a Bigger Risk Than It Sounds

Your PAYG instalment amount (or rate, if you're using the instalment rate method) is generally set using your most recently assessed tax return. If this year's income is tracking meaningfully lower — due to a slower trading period, a one-off prior-year gain that isn't repeating, or a genuine change in business circumstances — continuing to pay instalments calculated on last year's higher figure means overpaying throughout the year, even though you'll eventually get it back as a refund or credit at tax time.

For businesses managing cash flow carefully, that overpayment sitting with the ATO rather than in your own accounts for months at a time is a real, avoidable cost.

What Happens When a Trust Vests

Once the vesting date arrives, the trust generally cannot continue operating as a discretionary trust in its ongoing form. The trust property must be distributed in accordance with the deed's vesting provisions — often to the beneficiaries named or described as default beneficiaries at that specific point, rather than distributed at the trustee's ongoing discretion as it would have been beforehand.

This has significant practical consequences:

Loss of the trustee's discretionary distribution power, since post-vesting, income and capital are generally required to be dealt with as fixed entitlements under the vesting provisions, not discretionary decisions made each year.
A potential CGT event, since the change from a discretionary interest to a fixed, vested entitlement can, in some circumstances, trigger capital gains tax consequences on the underlying trust assets.
Unintended beneficiaries receiving entitlements, if the deed's default vesting provisions don't reflect who the family or business intends to benefit today, particularly if the deed hasn't been reviewed since it was drafted decades earlier.
Stamp duty implications, depending on the state and the nature of the assets involved, since a change in beneficial ownership arising from vesting can potentially trigger duty in some circumstances.

Can the Vesting Date Be Extended?

In many cases, a trust deed can be amended to extend the vesting date before it passes, provided the deed's own amendment powers allow this and it's done within the relevant legal limits. This is generally a straightforward exercise if identified early — but becomes considerably more complicated, and in some cases impossible, once the vesting date has already passed, since a trust that has legally vested generally cannot simply be "un-vested" after the fact.

Why Business Owners Should Check This Now, Not Later

Older family and business trusts are the highest risk, particularly those established more than 20-30 years ago without the deed being reviewed since.

Trusts that have been amended multiple times may have had their vesting date changed along the way — meaning even a business owner who "knows" the original vesting date may be working from outdated information if a later amendment shifted it.

Trusts acquired through a business purchase or restructure may not have had their vesting date properly checked as part of that transaction.

What to Check Right Now

Locate your trust deed and find the specific vesting date clause. If you can't quickly locate this, that's itself a sign the deed needs a proper review.

Confirm whether any subsequent deed amendments changed the original vesting date.

Calculate how many years remain until vesting, and flag it for review well in advance — not in the final year before it arrives.

If vesting is approaching, get advice on whether the deed can be amended to extend the date, and what the CGT and stamp duty implications of any amendment might be.

If a trust has already vested without anyone noticing, seek advice immediately, since this affects how trust income and assets should have been treated from the vesting date forward.

Don't Let a Decades-Old Date Catch You Out Today

If your business operates through a trust structure — particularly one established more than a couple of decades ago — it's worth confirming the vesting date now, while there's still time to act if a problem exists.

RBizz reviews trust deeds to confirm vesting dates and advises on extension options well before they become urgent — get in touch to check your trust's position.

GST-Free Sale of a Business as a Going Concern: The Conditions That Actually Need to Be Met

Thu, 13 Aug 2026 16:51:29 +1000

GST-Free Sale of a Business as a Going Concern: The Conditions That Actually Need to Be Met

Selling a business can potentially be treated as GST-free under the "supply of a going concern" provisions — meaning no GST is charged on the sale price at all. This is a significant cash flow advantage for both parties (the buyer doesn't need to fund the GST upfront, even though they'd normally claim it back eventually). But this treatment only applies if specific conditions are met, and getting even one wrong means the sale is treated as a standard taxable supply, with GST applying to the full price.

What "Going Concern" Actually Means Here

A going concern supply broadly means the sale includes everything necessary for the purchaser to continue operating the business, not just a collection of individual assets. The legal test focuses on whether the seller supplies to the buyer all the things necessary for the continued operation of the business, and the seller carries on the business until the day of the sale.

The Conditions That Must All Be Met

1. Both parties must be registered for GST. If either the seller or the buyer isn't GST-registered at the time of the sale, the going concern treatment isn't available, regardless of how the rest of the transaction is structured.

2. The sale must be for consideration. This needs to be a genuine sale for payment — not a gift or a nominal transfer.

3. The buyer must be registered or required to be registered for GST. This overlaps with the first condition but is worth stating separately: it's specifically the buyer's registration status that matters here, not just their general involvement in business.

4. The parties must agree in writing that the supply is of a going concern. This isn't optional or implied — it needs to be an explicit written agreement between buyer and seller confirming the going concern treatment is intended to apply. This is commonly addressed directly in the sale contract itself, but needs specific wording, not just a general reference to the sale.

5. The seller must supply all things necessary for the continued operation of the business. This is the most fact-dependent condition, and where sales most commonly fail the test. If the seller retains a key asset, contract, or right that's genuinely necessary for the business to keep operating (for example, retaining a critical piece of equipment, a key supplier agreement, or specific intellectual property essential to the business), the "all things necessary" test may not be satisfied.

6. The seller must carry on the business until the day of the sale. If the seller has already wound down, ceased trading, or materially changed the business before the sale completes, this condition can be jeopardised.

Where Sales Commonly Fail This Test

Excluding a "necessary" asset from the sale, such as a lease the seller wants to keep, a piece of equipment retained for another purpose, or specific contracts not assigned to the buyer — even where this seems like a minor exclusion to the parties involved.

Incomplete or vague written agreement wording, where the contract doesn't clearly and specifically state the parties agree the supply is of a going concern.

A gap between ceasing to trade and completing the sale, where the business effectively stopped operating before settlement, undermining the "carry on until the day of sale" condition.

One party's GST registration lapsing or not being active at the relevant time, which is worth checking specifically at the settlement date, not just assumed based on general registration history.

What Happens If the Conditions Aren't Met

If the going concern conditions aren't satisfied, the sale is treated as a standard taxable supply — meaning GST applies to the full sale price. This has real financial consequences: the seller needs to remit GST on the sale (even if it wasn't factored into the negotiated price), and the buyer needs to fund that GST upfront, only claiming it back as a credit later, creating a cash flow gap in the transaction that wasn't originally planned for.

What to Check Before Finalising a Business Sale

Confirm both parties are currently registered for GST, checked specifically as of the settlement date, not just at the time of negotiation.

Identify everything genuinely necessary for the business to continue operating, and ensure all of it is included in the sale — nothing critical retained by the seller.

Include specific, clear written agreement in the sale contract that the supply is intended to be treated as a going concern — don't rely on general contract language.

Confirm the business continues trading normally right up until settlement, avoiding an operational gap before the sale completes.

Get the GST treatment confirmed by a tax adviser before signing, since correcting a mistaken assumption after settlement is considerably more complicated than confirming it beforehand.

Don't Assume Going Concern Treatment Applies — Confirm It

Given how much difference this makes to the cash flow of a transaction, it's worth having the specific conditions checked against your actual sale structure before contracts are signed, not after.

RBizz reviews business sale structures to confirm going concern GST treatment applies before settlement — get in touch before you finalise your next transaction.

PAYG Instalments: How to Vary Them Down If Your Income Has Dropped This Year

Thu, 13 Aug 2026 16:49:34 +1000

PAYG Instalments: How to Vary Them Down If Your Income Has Dropped This Year

PAYG instalments are generally calculated based on your previous year's income — meaning if your business or personal income has dropped materially this year, you could be paying instalments based on a figure that no longer reflects reality. The ATO allows you to vary your instalment amount to better match your actual expected income for the current year, but the variation needs to be calculated properly, because getting it wrong in the wrong direction carries its own penalty.

Why This Happens in the First Place

For businesses managing cash flow carefully, that overpayment sitting with the ATO rather than in your own accounts for months at a time is a real, avoidable cost.

How to Actually Vary an Instalment

You can vary your PAYG instalment amount before it's due, generally through your instalment notice, tax agent, or Online services for individuals or business. The variation requires you to provide a reasonable estimate of your expected tax for the year, which then recalculates your remaining instalments to align with that revised figure.

The Part That Catches People Out: The Penalty for Getting It Wrong

If you vary your instalment down and your estimate turns out to be significantly understated relative to your actual final tax liability, a general interest charge can apply to the shortfall between what you paid through varied instalments and what you should have paid based on your actual result. This is specifically designed to discourage people from varying instalments down aggressively just to improve short-term cash flow, without a genuine basis for the lower estimate.

In practical terms: if you have a reasonable, evidence-based reason for the reduced estimate — a documented drop in revenue, a one-off prior-year item that won't recur, a genuine change in business activity — you're in a defensible position. If you're varying down purely because cash is tight this quarter, without the underlying full-year figures actually supporting a lower liability, you're taking on real risk of a penalty later.

When Varying Down Makes Sense

Your revenue has genuinely and materially dropped compared to the year the instalment was based on

A one-off item (large capital gain, unusual bonus income, a large one-time contract) inflated last year's figure in a way that won't repeat

Your business has undergone a structural change (scaling back, closing a location, losing a major client) with a clear, demonstrable impact on this year's expected income

When Varying Down Is Risky

Revenue is down temporarily but expected to recover before year-end, meaning your full-year figure may not actually be materially lower

You're estimating based on a rough guess rather than an actual review of year-to-date figures and a reasonable forecast for the remainder of the year

Multiple income sources exist and only one has dropped, without a full recalculation of total expected income across all sources

What to Do Before Submitting a Variation

Prepare an actual estimate based on year-to-date figures plus a reasonable forecast, not a rough guess of "business feels slower this year."

Document the basis for the reduced estimate, particularly if it relates to a one-off prior-year item or a specific, identifiable change in circumstances.

Reassess partway through the year if circumstances change again, since a variation isn't a one-time "set and forget" — if income recovers later in the year, a further adjustment may be needed to avoid ending up understated at year-end.

Get the estimate reviewed before submitting, particularly if the variation is substantial, since the general interest charge exposure scales with how far off the final estimate turns out to be.

Get Your Instalment Variation Calculated Properly

If your income has genuinely shifted this year, a properly calculated variation can meaningfully improve your cash flow without creating penalty exposure — but only if the underlying estimate is well-founded.

RBizz reviews year-to-date figures and calculates defensible PAYG instalment variations — get in touch before your next instalment is due.

Single Touch Payroll: What Actually Happens If You Report Late

Tue, 11 Aug 2026 12:34:37 +1000

Single Touch Payroll: What Actually Happens If You Report Late

Single Touch Payroll (STP) requires most employers to report payroll information to the ATO on or before each pay day — not weekly, not monthly, but at the time employees are actually paid. This catches businesses out more often than expected, particularly those used to thinking of payroll reporting as a periodic task rather than something tied to every individual pay run.

The Due Date Is Pay Day, Not Later

Under STP, the report is generally due at the same time you pay your employees — the pay event itself triggers the reporting obligation. This is a meaningfully different mental model to BAS or income tax, where there's a clear gap between the transaction and the lodgment deadline. With STP, if payday is Thursday, the report is due Thursday.

What Commonly Causes a Late Report

Payroll software issues on pay day itself, where a technical problem delays the report beyond the actual pay date.

Manual or semi-manual payroll processes where the STP submission is treated as a separate, later administrative step rather than part of processing the pay run itself.

Correcting an error after the fact, which can sometimes require a subsequent report that technically falls outside the standard pay-day timing.

New employers or new payroll systems not yet properly configured to submit automatically at the point of payment.

What Actually Happens If You're Late

For businesses generally reporting on time with an occasional, genuine one-off delay, the ATO's approach is typically not to apply penalties automatically — there's meaningful practical flexibility built into the system, particularly for new employers and isolated incidents. However, a pattern of late reporting, or a failure to report at all, can result in a failure-to-lodge penalty being applied, in the same broader category as other lodgment obligation penalties.

Where This Interacts With Other Obligations

STP data feeds directly into how the ATO cross-checks other reporting — including PAYG withholding amounts reported on your BAS and superannuation guarantee contributions. Inconsistent or late STP data can create the kind of mismatch that specifically flags a business for closer review, separate from any penalty for the late report itself.

What to Check in Your Payroll Process

Reporting on Time Is Simpler Than Fixing a Pattern of Lateness

STP compliance is generally straightforward once properly configured — the risk sits almost entirely in setup and process gaps, not in the underlying rule itself being complicated. Getting the process right once removes this as an ongoing concern.

RBizz reviews payroll processes to confirm STP reporting is properly configured and genuinely tied to your pay cycle — get in touch if you're unsure your setup is compliant.

How Long Do You Actually Need to Keep Business Records? The 5-Year Rule Explained

Mon, 10 Aug 2026 16:14:29 +1000

How Long Do You Actually Need to Keep Business Records? The 5-Year Rule Explained

The general rule is straightforward: keep business records for 5 years. The part that catches people out is knowing exactly when that 5-year clock starts, because it isn't always "5 years from today" — and getting it wrong means either keeping records far longer than necessary or, more riskily, discarding something you still need.

When the Clock Actually Starts

For most records, the 5-year period runs from whichever of these is later:

The date you prepared or obtained the record, or
The date the transaction or acts the record relates to were completed

For records supporting a tax return, this generally means 5 years from the date you lodge that return — not 5 years from the date of the underlying transaction itself. A supplier invoice from March doesn't need to be kept for 5 years from March; it needs to be kept for 5 years from when the return relying on that invoice was lodged.

What Actually Needs to Be Kept

Sales and purchase invoices

Bank statements and reconciliation records

Payroll records, including superannuation contribution records

BAS and GST records, including calculation worksheets

Asset purchase and disposal records, including depreciation schedules

Any records substantiating a claimed deduction

Where the 5 Years Can Actually Be Longer

What Happens If You Can't Produce a Record

If the ATO reviews a return and you can't substantiate a claimed deduction or a reported figure, the claim can be disallowed — meaning you retroactively owe tax on an amount you may have genuinely spent, simply because you can no longer prove it. This is a real financial cost, not just a compliance inconvenience.

A Practical Retention System

Tag records by financial year lodged, not just the date on the document itself — this makes the 5-year calculation straightforward rather than requiring you to work it out retrospectively.
Keep a separate, longer-retention folder for depreciating assets and CGT-relevant records, since these don't follow the standard 5-year rule.
Digitise records where possible — physical storage for a decade-plus retention period (for depreciating assets or CGT records) becomes impractical quickly, while digital storage doesn't.
Don't destroy anything currently under ATO review, even if the standard 5-year period has technically passed.

Check Your Retention System Before You Clean House

If you're about to do an end-of-financial-year clean-out of old records, it's worth checking which ones are genuinely past their retention period and which ones (depreciating assets, CGT-relevant records) need to stay well beyond the standard 5 years.

RBizz can review your record-keeping practices to confirm you're retaining what you need and safely clearing what you don't — get in touch before your next clean-out.

Superannuation Contribution Caps: Concessional vs Non-Concessional, and What Happens If You Go Over

Fri, 07 Aug 2026 00:09:06 +1000

Superannuation Contribution Caps: Concessional vs Non-Concessional, and What Happens If You Go Over

Superannuation contributions are split into two categories for tax purposes — concessional and non-concessional — and each has its own annual cap. For business owners making larger or irregular contributions (rather than a steady employer contribution each pay cycle), it's genuinely easy to exceed one of these caps without realising it until an assessment arrives. Here's exactly how each cap works and what the consequence actually looks like if you go over.

Concessional Contributions

Concessional contributions are made from before-tax income and are taxed within the super fund at a concessional rate. This category includes:

Employer Superannuation Guarantee contributions
Salary sacrifice contributions
Personal contributions you claim a tax deduction for The general concessional cap is $30,000 per financial year (this figure is indexed periodically, so confirm the current year's cap before relying on it).

Carry-forward (catch-up) contributions: if your total super balance was below $500,000 at the end of the previous financial year, you may be able to use unused concessional cap amounts from the previous five years, on top of the current year's cap. This is genuinely useful for business owners who had a lean year followed by a strong one, but it needs to be tracked carefully — the unused amounts expire after five years if not used.

Non-Concessional Contributions

Non-concessional contributions are made from after-tax income — money you've already paid tax on — and are not taxed again within the fund on entry.

The general non-concessional cap is $120,000 per financial year.

The bring-forward rule: if you're under age 75 at some point during the financial year, you may be able to bring forward up to two additional years of non-concessional cap, allowing a contribution of up to $360,000 in a single year (three years' worth combined). Once you trigger the bring-forward, your cap for the following two years is reduced accordingly — you can't then also use each of those years' full caps again.

Total super balance restrictions: your total super balance affects how much (if any) non-concessional cap you have access to. As your total super balance approaches or exceeds certain high thresholds, your non-concessional cap can be reduced to a lower amount, or to zero entirely — meaning a further non-concessional contribution wouldn't be permitted at all.

What Actually Happens If You Exceed a Cap

Exceeding the concessional cap: The excess amount is included in your assessable income and taxed at your marginal tax rate, with a credit for the 15% tax already paid within the fund. You'll also generally be liable for an excess concessional contributions charge, which is effectively an interest charge reflecting the fact that this tax wasn't paid at the time the income would ordinarily have been taxed.

Exceeding the non-concessional cap: This is treated more strictly. Excess non-concessional contributions can be taxed at the top marginal rate if left in the fund, though you generally have the option to withdraw the excess (plus associated earnings) from your fund instead — in which case the associated earnings are included in your assessable income, but the excess contribution amount itself is not further taxed. Failing to act on an excess non-concessional contribution notice within the required timeframe generally results in the harsher default tax treatment applying.

Why Business Owners Are Particularly at Risk

Irregular income makes timing harder to manage — a strong year might tempt a large catch-up contribution that inadvertently breaches the cap once carry-forward amounts are properly calculated (or aren't available at all).
Multiple contribution sources can stack up unnoticed — employer SG contributions, salary sacrifice, and a personal deductible contribution can combine to exceed the concessional cap without any single contribution looking excessive on its own.
A large asset sale or business sale can trigger a large one-off non-concessional contribution, sometimes without the total super balance restrictions being checked first.

What to Check Before Making a Large Contribution

Confirm the current year's concessional and non-concessional caps, since these are indexed periodically and may differ from figures you've seen previously.

Add up all concessional contributions for the year across every source — employer SG, salary sacrifice, and personal deductible contributions — before assuming you have room for more.

Check your total super balance before relying on carry-forward concessional amounts or the non-concessional bring-forward rule, since both depend on balance thresholds.

Confirm whether you've already triggered the bring-forward rule in a previous year, since this affects your available cap for the current and following years.

Get the calculation checked before the contribution is made, not after — correcting an excess contribution after the fact is a considerably more complicated (and costly) process than confirming the cap beforehand.

Get Your Contribution Room Confirmed Before You Contribute

If you're planning a larger or catch-up superannuation contribution this year, it's worth confirming your actual available cap first, factoring in your total super balance and any contributions already made.

RBizz calculates available contribution caps, including carry-forward and bring-forward entitlements, before you make a contribution — get in touch to check your numbers first.

The Small Business Income Tax Offset: Who Actually Qualifies and How It's Calculated

Fri, 07 Aug 2026 00:08:46 +1000

The Small Business Income Tax Offset: Who Actually Qualifies and How It's Calculated

The small business income tax offset reduces the tax payable on income from an unincorporated small business — but it's capped at $1,000 per person, per year, and the calculation itself is often misunderstood because it's based on a percentage of tax payable on business income, not a flat deduction or a simple percentage of profit.

Who Can Actually Claim It

This offset is available to:

Sole traders running a small business
Individuals with a share of net small business income from a partnership or trust

It is not available to companies — this offset specifically applies to individuals with business income taxed at their personal marginal rate, which is why it doesn't extend to company structures (companies access a different, separate concessional company tax rate instead).

Eligibility also depends on your business meeting the turnover threshold for the small business definition applicable to this offset. Confirm the current turnover threshold applies to your specific business before assuming you qualify.

How the Offset Is Actually Calculated

The offset is calculated as a percentage (currently 16%, though this rate has changed over time and should be confirmed for the current year) of the income tax payable on your business income — not 16% of your business profit itself. This distinction matters:

Example of the calculation logic (illustrative only — confirm current rate before use): If your net small business income is $50,000 and the income tax payable specifically attributable to that business income (calculated proportionally against your total taxable income) works out to $8,000, the offset would be 16% of that $8,000 tax figure — not 16% of the $50,000 income itself. This produces a considerably smaller offset than people often assume when they first hear "16%" and mentally apply it to their profit figure instead.

The $1,000 cap: regardless of how the percentage calculation works out, the maximum offset available is $1,000 per individual per year. For business owners with meaningful profit, the calculated offset frequently exceeds $1,000 and is simply capped there — meaning above a certain income level, the offset stops scaling with profit at all.

Common Mistakes

Applying the percentage to business income instead of tax payable — this significantly overestimates the actual offset and can lead to inaccurate tax planning based on a much larger expected reduction than what's actually available.

Assuming a company can claim it — this offset is specific to individuals with business income taxed at marginal rates; company structures don't have access to it at all.

Not checking current eligibility turnover thresholds, since the definition of an eligible small business for this offset is tied to specific turnover limits that are periodically reviewed.

Forgetting the offset applies per individual, not per business — a partnership with multiple partners means each partner separately calculates and claims their own offset (subject to their own $1,000 cap), based on their individual share of the business income and their own personal tax position.

What This Means in Practical Terms

For most established small business owners with meaningful trading income, this offset will land at or near the $1,000 cap — meaning the exact percentage calculation matters less than simply confirming you're eligible and that the offset has been applied at all. For businesses with smaller or more marginal profit, the percentage calculation matters more, since the offset may sit below the cap and directly reflect your actual proportional tax position.

What to Check on Your Own Return

Confirm you're operating as a sole trader, or receiving a share of business income through a partnership or trust — not through a company structure.

Check your business meets the current turnover threshold for small business eligibility under this specific offset.

Don't estimate the offset as a simple percentage of profit — it's calculated against tax payable on that income, which is a meaningfully different (and usually smaller, pre-cap) figure.

If you're part of a partnership, confirm each partner is calculating their own offset separately, based on their individual share and personal tax position.

Make Sure You're Actually Claiming This

This offset is often applied correctly by tax software and registered agents as a standard part of preparing an eligible return, but it's worth confirming it's been applied to your return at all, and that the underlying calculation reflects your correct business structure and turnover position.

RBizz confirms small business offset eligibility and calculation accuracy as part of every eligible client's return — get in touch to check yours has been applied correctly.

Div 7A Benchmark Interest Rate: How It's Set and What It Means for Your Loan Repayments

Thu, 06 Aug 2026 14:45:47 +1000

Div 7A Benchmark Interest Rate: How It's Set and What It Means for Your Loan Repayments

If your company has a complying Division 7A loan to a shareholder or director, the minimum yearly repayment isn't a figure you choose — it's calculated using the Div 7A benchmark interest rate, published annually by the ATO. Getting this calculation wrong is one of the most common ways a genuinely well-intentioned complying loan accidentally turns into a deemed dividend.

Where the Rate Comes From

The benchmark interest rate is published by the ATO each year for the relevant income year, based on the Reserve Bank of Australia's indicator lending rate for standard variable housing loans for owner-occupiers. It's not something your company negotiates or sets internally — it's a fixed, published figure that applies uniformly to every complying Div 7A loan for that income year.

Where to find the current rate: the ATO publishes this rate on its website each year, typically titled something like "Division 7A – benchmark interest rate." Because this rate changes annually and can move meaningfully year to year depending on interest rate conditions, always check the current published figure for the specific income year the loan relates to — don't reuse last year's rate.

How the Minimum Yearly Repayment Is Actually Calculated

For a complying Div 7A loan, the minimum yearly repayment is calculated as:

Minimum repayment = (Opening loan balance for the year × benchmark interest rate) ÷ (Loan term factor based on years remaining)

More precisely, the calculation uses an amortisation formula that spreads the loan (principal plus interest) evenly across the remaining term, similar to how a standard mortgage repayment is calculated. The exact figure depends on:

The loan's opening balance at the start of the income year
The current year's benchmark interest rate
The number of years remaining in the loan's maximum term (generally 7 years for an unsecured loan, or up to 25 years for a loan secured by a registered mortgage over real property)

Worked example (illustrative only — confirm the current rate before using this for an actual calculation): If a company loan has an opening balance of $100,000, a benchmark interest rate of 8%, and 6 years remaining on a 7-year unsecured loan term, the minimum yearly repayment would need to cover both the year's interest ($8,000) and enough principal to keep the loan on track to be fully repaid within the remaining term — calculated using an amortisation schedule, not simply interest-only.

Why Getting This Wrong Is So Costly

If the minimum yearly repayment isn't made in full by the company's lodgment day for that income year, the shortfall is treated as an unfranked dividend to the borrower — assessable in their hands at their marginal tax rate, generally without any franking credit to offset it. This isn't a warning or a request to top up next year; it's an immediate deemed dividend for the shortfall amount in that income year.

Common Mistakes With the Benchmark Rate Calculation

Using last year's rate instead of the current year's published rate — the rate changes annually and using an outdated figure produces an incorrect (usually too low) minimum repayment.

Calculating interest-only instead of a proper amortisation schedule — a complying loan requires the balance to reduce over the term, not just interest to be covered each year.

Miscounting the loan term — using 7 years for a loan that should be on the 25-year secured schedule (or vice versa) changes the required repayment amount significantly.

Missing the repayment deadline — the minimum repayment needs to be made by the company's lodgment day for the relevant income year, not simply "sometime during the year."

What to Check on Your Company's Loan Right Now

Confirm you're using the current income year's published benchmark rate, not a prior year's figure.
Recalculate the minimum yearly repayment using a proper amortisation approach, not a simple interest-only estimate.
Check the repayment has actually been made (or will be made) by the company's lodgment day for this income year.
Confirm which loan term applies — 7 years unsecured or up to 25 years if secured by a registered mortgage — since this materially changes the required repayment.

Don't Let a Calculation Error Trigger a Deemed Dividend

Given the direct, immediate consequence of an underpayment, it's worth having the minimum repayment calculation checked against the current benchmark rate before your lodgment deadline, rather than assuming last year's repayment amount still applies.

RBizz calculates Div 7A minimum repayments correctly against the current benchmark rate — get in touch before your lodgment day to confirm your figures.

Employee Share Schemes: Tax Treatment for Startups Offering Equity

Wed, 05 Aug 2026 17:13:45 +1000

Employee Share Schemes: Tax Treatment for Startups Offering Equity

Offering equity is one of the most common ways growth-stage businesses attract and retain talent when cash salaries can't compete with larger, better-funded competitors. But shares and options granted to employees aren't taxed like ordinary salary — they fall under a specific set of rules known as employee share scheme (ESS) taxation, and getting the structure wrong can create an unexpected tax bill for the employee, sometimes before they've realised any actual value from the equity at all.

What an Employee Share Scheme Actually Covers

An ESS arrangement generally involves an employer providing shares, share options, or similar equity interests to employees in connection with their employment, often at a discount to market value or for no cost at all. The tax treatment of that equity depends on how the arrangement is structured, when the resulting tax liability is triggered, and whether specific startup concessions apply.

The Core Tax Question: When Is the Benefit Taxed?

The central issue in ESS taxation is timing — specifically, whether the discount received on the equity is taxed upfront (in the year it's granted) or deferred to a later point, such as when restrictions lift or the equity is sold.

Upfront taxation generally applies unless the arrangement qualifies for deferral, meaning the employee is taxed on the discount in the income year the equity is granted — which can create a real cash flow problem if the employee hasn't received any cash alongside the equity to cover the resulting tax liability.

Deferred taxation may be available where specific conditions are met, pushing the taxing point out to a later, more relevant time — such as when shares vest, restrictions are lifted, or the employee ceases employment — rather than taxing the benefit immediately upon grant.

The Startup Concession

Recognising that upfront taxation can be a significant barrier for early-stage companies trying to use equity as a genuine talent attraction tool, specific concessions have historically been available for eligible startups, allowing certain ESS interests to be taxed on a more favourable basis — deferring the tax point and potentially reducing the amount ultimately assessed, subject to meeting eligibility criteria around company size, age, and the terms of the scheme itself.

Because eligibility for these concessions depends on specific, defined criteria — including company turnover, incorporation date, and scheme structure — it's important to confirm your company actually meets current eligibility requirements before assuming the concessional treatment applies.

Where Startups Commonly Get This Wrong

Assuming any equity grant automatically qualifies for concessional or deferred treatment, without checking the arrangement against the specific eligibility tests.

Not communicating the tax implications to employees clearly, leaving staff surprised by a tax liability on equity they haven't yet been able to convert to cash.

Structuring the scheme informally, without proper documentation, valuation, or agreements — increasing both compliance risk and the difficulty of demonstrating the arrangement meets any concessional criteria.

Overlooking valuation requirements, since the discount subject to tax depends on an accurate market valuation of the shares or options at the relevant time, which for early-stage companies can itself be a genuinely complex exercise.

Not reviewing the scheme as the company matures, since eligibility for startup-specific concessions can change as the company grows past certain size or age thresholds.

What to Check Before Offering Equity

Confirm whether your company currently meets the eligibility criteria for startup ESS concessions, rather than assuming any growth-stage company automatically qualifies.

Get a proper valuation of the shares or options being granted, since this underpins the tax calculation for both the company and the employee.

Document the scheme formally, including grant terms, vesting conditions, and any restrictions, to support the intended tax treatment.

Communicate the tax implications to employees before they accept the offer, so they understand when a tax liability may arise and what to plan for.

Reassess the scheme's tax treatment as the company grows, since a scheme structured while the company was ESS-concession-eligible may need review once it no longer meets those criteria.

Equity Is a Powerful Tool, But the Tax Treatment Needs to Be Right

Employee share schemes remain one of the most effective ways for growth-stage businesses to attract talent without straining cash flow — but only when the tax treatment is understood and properly structured from the outset, both for the company's compliance position and for the employees receiving the equity.

RBizz structures and reviews employee share schemes to confirm eligibility for concessional treatment and manage the tax implications for both employer and employee — schedule a free consultation before your next equity grant.

Non-Resident Directors and Tax Obligations for Foreign-Owned Australian Companies

Wed, 05 Aug 2026 16:08:42 +1000

Non-Resident Directors and Tax Obligations for Foreign-Owned Australian Companies

Foreign parent companies setting up an Australian subsidiary often assume the entity can be directed entirely by executives based overseas, the same way it might operate in other jurisdictions. Australian corporate and tax law takes a different approach — and understanding the director residency requirements, along with the tax consequences that flow from how a company is actually managed, is essential for any foreign-owned business operating here.

The Director Residency Requirement

Australian companies are generally required to have at least one director who ordinarily resides in Australia. This isn't simply a compliance formality — it reflects a broader principle that the Australian entity needs a genuine local presence for corporate governance purposes, not just a registered address.

For foreign parent companies without an existing Australian-resident executive, this requirement is commonly met through:

Appointing an Australian resident already within the business or its network, where a suitable candidate exists.
Engaging a professional resident director service, providing a qualified local director specifically to satisfy this requirement while the company establishes its own local presence.

Failing to meet this requirement isn't just a compliance gap — it can affect the company's ability to be validly registered and operated as an Australian entity in the first place.

Why Central Management and Control Matters for Tax

Beyond the director residency requirement, Australian tax law also looks at where a company's central management and control actually takes place when determining tax residency. This matters because a company's tax residency status affects how its income is taxed in Australia, and potentially in the parent company's home jurisdiction as well.

If key strategic decisions are made entirely by executives overseas, with the Australian director role being largely nominal, this can create complexity around whether the company's central management and control genuinely sits in Australia — which has flow-on implications for tax residency and potentially double taxation if the position isn't clearly established.

Where Foreign-Owned Structures Commonly Get This Wrong

Treating the local director role as purely administrative, without ensuring genuine governance decisions are reflected in board minutes and local decision-making processes.

Assuming a resident director service satisfies every compliance requirement automatically, without understanding what the role does and doesn't cover in terms of actual company management.

Not documenting where key decisions are actually made, which can matter significantly if tax residency or central management and control is ever questioned.

Overlooking related-party transaction implications, since decisions made by overseas parent company executives affecting the Australian entity can raise separate transfer pricing and thin capitalisation considerations.

Assuming resident director obligations end once the requirement is technically satisfied, without an ongoing review as the company's Australian operations and governance structure mature.

What Foreign-Owned Businesses Should Have in Place

Confirm the company meets the Australian resident director requirement, either through an existing local executive or a properly engaged resident director service.

Ensure genuine governance activity is documented locally, including board minutes, resolutions, and decision-making records that reflect real involvement, not just a nominal appointment.

Review where central management and control actually occurs, particularly if strategic decisions are predominantly made by overseas parent company personnel.

Coordinate tax residency positioning with the parent company's home country tax advisers, to avoid inconsistent treatment or unexpected double taxation exposure.

Reassess governance arrangements as the Australian entity grows, since a structure appropriate for initial market entry may need to evolve as local operations and decision-making mature.

Getting the Governance Foundation Right From Entry

The director residency requirement and the broader question of tax residency aren't just box-ticking exercises — they establish the legal and tax foundation the Australian entity operates on. Getting this right from the outset avoids more complex questions arising later, particularly if the company's tax residency position is ever reviewed or challenged.

RBizz provides resident director services and reviews governance arrangements for foreign-owned Australian companies — schedule a free consultation to make sure your structure is properly established.