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  • Subject Name : Taxation

Decision Making Processes - Answer 1

How the new company should adopt good tax governance practices

The tax audit implications

In the event of an audit, the new company should be able to show to the Australian Tax Office that it has the ability to identify mistakes and alleviate tax risks. Where audit reviews are taken, and the taxpayer does not have a satisfactory influence and risk management framework, the Australian Tax Office has stated that this may show the need for additional resources like specific audits to be used in order to completely evaluate tax risks. There should also be proper keeping and documentation of evaluated tax risks.

The board-level duties versus the managerial level responsibilities

Board level responsibilities centre on the development and supervision of the general tax governance structure and ensure that it is correctly positioned within the company's entire corporate governance framework. The board should set the tone for the whole company, endorsing a formalized tax control framework, ensuring they have all the information regarding salient tax issues arising and reviewing control testing strategies and results that would help them to reach better decisions.

Three things the company must know regarding the ATO Corporate tax governance overview

The following issues should be high on the new company's list:

  1. Put in place a tax risk management plan for the board, management, and employees to follow. This should include time to time 'check-ins' to ensure that the board's policy has been correctly adopted and followed by management and employees.
  1. Aim to implement the 'justified trust' concept important to their company size/structure - as this will hold the company in good stead when identifying and avoiding tax risks.
  1. Directors require familiarizing and being aware of the salient tax risks facing the new company - they must have enough knowledge to be able to identify the risks and put processes in place to prevent such risks. They can achieve this by seeking proper advice from the Australian Tax Office.

Explanation:

How the new company should adopt good tax governance practices

The tax audit implications

In the event of an audit, the new company should be able to show to the Australian Tax Office that it has the ability to identify mistakes and alleviate tax risks. Where audit reviews are taken, and the taxpayer does not have a satisfactory influence and risk management framework, the Australian Tax Office has stated that this may show the need for additional resources like specific audits to be used in order to completely evaluate tax risks. There should also be proper keeping and documentation of evaluated tax risks.

The board-level duties versus the managerial level responsibilities

Board level responsibilities center on the development and supervision of the general tax governance structure and ensure that it is correctly positioned within the company's entire corporate governance framework. The board should set the tone for the whole company, endorsing a formalized tax control framework, ensuring they have all the information regarding salient tax issues arising and reviewing control testing strategies and results that would help them to reach better decisions.

Three things the company must know regarding the ATO Corporate tax governance overview

The following issues should be high on the new company's list:

  1. Put in place a tax risk management plan for the board, management, and employees to follow. This should include time to time 'check-ins' to ensure that the board's policy has been correctly adopted and followed by management and employees.
  1. Aim to implement the 'justified trust' concept important to their company size/structure - as this will hold the company in good stead when identifying and avoiding tax risks.
  1. Directors require familiarizing and being aware of the salient tax risks facing the new company - they must have enough knowledge to be able to identify the risks and put processes in place to prevent such risks. They can achieve this by seeking proper advice from the Australian Tax Office.

Decision Making Processes - Answer 2

Advisers who are involved in the design, marketing and implementation of schemes that claim to provide taxation benefits should consider the promoter penalty laws.

Robert is to be considered a promoter of tax avoidance scheme because as he says he has identified a way to avoid taxes that will offer at a fee.

(Bruce, 2016), As per the Bruce, Tax Avoidance- It is simply is the practice of minimising tax liability through legal means. e.g there are many tax avoidance practices which are condoned by legal sources, such as an ISA or a pension scheme of long-term savings.

Tax Planning- it is the term used for practising tax avoidance to minimise tax liability. It the planning to be able to take the benefits to minimise tax that is again legal available opportunities.

The key difference in these two i.e. avoidance and planning that one increases the risk whereas the planning either reduces it or never increases the risk. Whereas in case of Tax evasion the Tax evaders have the intention to break rules for their tax liability and avoid payment the tax they owe.

A scheme is considered as a tax avoidance scheme it is at time of promotion it has the sole purpose of gaining an entity for the benefit which may not be available legally or otherwise. It will be treated as offence and will not be permitted in the eye of law. The penalty for this as per Federal Court is that court can impose max penalty of 5000 units for an individual or twice the consideration received or receivable, directly or indirectly against such scheme.

As per ATO, Tax avoidance schemes involves the deliberate attempt of tax exploitation. The ATO consider this very serious offence, and takes it seriously these schemes which are just designed to avoid tax and erode the integrity of the tax. (Anon., n.d.)

Society expects tax agents to be responsible, and committed to the service of the public accordingly, the way to which Robert is advising his clients will in fact, be question to the interest of the community at large, as well as to the profession itself

Decision Making Processes - Answer 3

As per this case study Mr. Jack Cashman(senior) who files his own returns get amendment assessment for an additional tax amount on interest which according to him does not belong to him but might be of his son. Firstly he should consult it with his son and get verified that whether the account number stated belongs to his son or not , Secondly if yes then whether his son i.e.Jack Cashman (Junior) has added that interest amount in his assessable income or not.

If yes then also and if no then also , Mr. Jack (senior ) should approach to the ATO for the alteration of this mistake may be this is amended notice is not for him or may be it is considered as his bank account by mistake so ideally he should apply for in – house facilitation. (Anon., 2020) as per ATO process it say that in-house facilitation is a mediation process where an impartial ATO facilitator meets with requestor and the ATO case officers to:

  • identify the issues in dispute
  • develop options
  • consider alternatives
  • Attempt to reach a resolution.

Mr. Jack Cashman (senior) Mr. Jack Cashman (senior) should apply for in-house facilitation.

To request an in-house facilitation, Mr Jack Cashman (senior) needs to fill in the request for in-house facilitation form.

References for Decision Making Processes

Anon., 2020. general dispute-or-object-to-an-ato-decision/options-for-resolving-disputes/in-house-facilitation. [Online]
Available at: https://www.ato.gov.au/general/dispute-or-object-to-an-ato-decision/options-for-resolving-disputes/in-house-facilitation
[Accessed 20 August 2020].

Anon., n.d. [Online].

Anon., n.d. Tax-planning-vs-Tax-avoidance. [Online]
Available at: https://www.informedinvestor.com.au/Topics/Tax-planning-vs-Tax-avoidance.html#:~:text=Tax%20planning%20is%20the%20process,and%20other%20taxes%20is%20minimised.&text=Tax%20avoidance%20schemes%20involve%20the%20deliberate%20exploitation%20of%20the%20tax%20s
[Accessed 28 Aug 2020].

Bruce, B.-A., 2016. tax-avoidance-tax-planning-tax-evasion-whats-difference-6316.html. [Online]
Available at: https://www.theaccountancy.co.uk/tax/tax-avoidance-tax-planning-tax-evasion-whats-difference-6316.html

Bauer, R., and H.A. Guenster. 2014. Good corporate governance pays off! Wellgoverned companies perform better on the stock market." Working Paper (April).

Collins, Jim. 2011. Good to Great: Why Some Companies Make the Leap and others Don't. New York: Harper Collins Publishers.

Nadler, David A., Beverley A. Behan, and Mark B. Nadler (editors). 2016. Building Better Boards: A Blueprint for Effective Governance. San Francisco: Jossey-Bass.

Remember, at the center of any academic work, lies clarity and evidence. Should you need further assistance, do look up to our Taxation Assignment Help

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