Advanced Revenue Law: The Rights of the Accountant and the Client - Assignment Example

Name Tutor Course Date Question Two Starting a company is termed as worthwhile and pleasing activity that an individual can engage in thus one need to protect his personal assets and the protection of personal assets has with time been advocated for as a major and necessary step in the formation of a new company or business. Trading trust has over the years been used and majority specialized consultants are gladly proposing their use to most of their customers as a substitute trading medium. A discretionary trading trust is typically formed by an action of agreement where a settlor offers an ostensible amount of money as the preliminary capital for the trust and hires a trustee to run the trust. Both the individuals and company are competent of acting as trustees however a business trustee is most preferred. The business operators have control of the trustee corporation and both its managers and the shareholders. A discretionary trading trust mainly generates its income from its trading activities. The standard of asset protection is destined for an individual to separation himself or herself individually from the assets he posses, this is done in the aim of protecting the assets from been attacked by the creditors in future. Discretionary trust can consequently be applied as an asset protection technique in which the settlor can act as a protector and a recipient, but the settlor cannot be a trustee and a sole beneficiary. In such a scenario the settler is therefore viable gain from the trust possessions, with no actual ownership, and consequently with the possessions not been there for the creditors. In most cases trust are usually established and are given different names so as to safeguard anonymity. Trusts are usually the most commonly used and applied assets protection techniques in the modern day business world. When assets are transferred into trust the title is consequently held by a third party. Discretionary trusts offer the trustees an option to pay or apply for a recipient benefit or no trust income primes in a way that they think is appropriate. The beneficiaries do not have a lawfully enforceable right to the assets; therefore the creditors are not able to attain the trust corpus. Thus in William Lee case a discretionary trust can be useful in protecting his personal assets and wealth. The formation and establishment of a trust has been attributed to having certain tax benefits. The tax penalties associated with a trust are usually diverse from the tax penalties using another route. Therefore William is able to avoid paying a higher tax by development of the trust. Thus the aspect of tax avoidance is the tax benefit associated with the establishment of the trust. A trading trust is generally defined as an association that is formed and one individual holds the asset as the lawful owner; nevertheless the lawful ownership is for the benefit of the other parties in the trading trust. The formation of a trading trust is commonly attributed to having various advantages. One of the major advantages of establishing a trading trust is that the business profits can be allocated to trust beneficiaries in any proportion. This flexibility enables efficient utilization of marginal tax rates. Another advantage is that it minimizes or shuns tax liability; this is mainly realized through a clear distinction between asset control and ownership. Another advantage of the trading trust is that it ensures a lifetime financial management: a trust has been found to efficiently consolidate all financial dealings in a single vehicle, thus contributing to simplicity of the management function. Trading trust also aids in the protection of personal assets, with legal action and political instability one personal assets are at risk and an asset protection trust can help in easing the problem. An asset protection trust can do much to alleviate this problem. A trading trust also aids in the countenance of the business, corporate structures are efficiently run by a trust and at the same time the trust assists in the allocation of profits as desired. A trust has also been found to be a necessary tool in the creation of a pension scheme for workers, thus a trust is a useful medium for the accumulation and distribution of pensions amongst workers .a trading trust also make resources available for educational purposes even after death thus the family is not stressed up by find money to cater for their daily expenses. A trading trust also offers a creditor with protection and an elastic ways of distributing the income of the trading1. A service trust offers services to a specialized practice and to business units. The owners are the one having the major control of the activities of service trust and it is mainly used in the planning of tax to transfer earnings from the professional’s side or the business unit side to a third party thus attracting a lower tax rate. A service trust is mainly attributed to having a lot of benefits. One of the benefits of a service trust is that it attracts a lower interest rate. This is achieved through the rerouting of earning from the business unit to another person and thus a lesser interest arte is charged. Another benefit of a service trust is that it ensures a long tie financial management. By the use of a trust almost all the financial management functions are combined into one location this aids in effective management. By using a service trust it helps in protecting the business assets from the creditors. Another benefit of a service trust is that it enhances privacy upon death since a service trust is not subject to public probate. A service trust also offers a future administration of personal assets so as to protect against future inability. A trust also makes the administration if assets possible for the beneficiaries who are not able of the proper management of the assets due to certain aspects such as age, sickness or the mare lack of business skills. Question Three A self managed superannuation fund which is also abbreviated as SMSF is generally defined as a minute superannuation fund which is comprised of about one to four members who are related or not related and the fund is mostly administered by the trustees or executives who are also the associates in the named SMSF2. The members have the full control and they make decisions on how the fund will be run and the kind of investment that will be made by. Most SMSFs permit individuals to run their personal super investment for them to use during their old age days. Most SMSFs are designed in such a way to convene the precise investment requirements of members and superior management over investment tactics. There are certain requirements which are set under the super laws that a fund need to meet for it to be termed as a SMSF. The requirements tend to be diverse depending on whether the fund has one of the following types of members: individual trustees, a single member and, a corporate trustee. A basic necessity of a SMSF is a clear and concise investment strategy. The strategy is set in such a way that the funds are solely invested for the full advantage of the fund members. The investment strategy ought to take into account the dangers which are mainly associated with investments, the expected profits, asset allotment, diversification and the funds liquidity. The trustees of the fund have a responsibility of making investment decisions. The trustees also have a right to choose the most appropriate investment for the fund. The superannuation industry (supervision) ACT clearly articulates the requirements that must be followed by the fund trustees when making nay kind of investment. There is a wide variety of investments that can be made using the SMSF fund. Such invest includes: one, invest in shares. Most individuals tend to invest their SMSFs fund in direct shares. Shares at times bought from the fund members either at current values in the market or sometimes from the stock exchange by the use of a broker or in some instance the shares can be bought online. Another investment that can be made using the fund is investments in residential property. Fund from the SMSFs can invest in residential properties for example vacant land, houses, units and town houses. Real estate has been associated with certain benefit such as one can be able to by far borrow money, thus enlarging the potential profits. Investment in properties has for a long time been confirmed to be a major and noteworthy investment in Australia, nevertheless it was cumbersome to procure due to the tight limitations which had been placed on loans related to SMSF trusts. Over time these limitations have been lifted and thus many individuals have opted to invest their trust by buying property. Another invest is the investing in commercial property. Most stylish investors that are conversant with the dangers and rewards associated with invest opt to invest their funds in commercial properties. Typical offices, shops or storehouses investment are among the widespread due to the ease to finance thus presenting noteworthy gearing reimbursements. Some properties such as planking houses and service stations have been proved to take a large amount of money and such large amounts of money may not be available in the SMSF. Thus when one is choosing the investment to make one should choose an investment that suits the preferred danger profile and targeted amount of profit. SMSF can also invest in managed funds. Managed funds offers entrée to investment bazaars that are hard to be accessed directly, a good example of such bazaars is the international stock markets. SMSF also offers an extensively expanded range for comparatively small investors. Prior to making any investment decision it is vital to comprehend the regulatory limitations that are placed on SMSF; for instance, a fund cannot be loaned money to invest in assets except if the funds are offered through an installment warrant agreement. Also a fund is not allowed to obtain assets from members of the fund neither re they allowed to invest in in-house assets; for instance the fund is not allowed to purchase members assets. There are also other restrictions placed on the fund which include the incapability to loan money to the members or their relations or to offer assets of the fund as security for personal borrowing. In addition to the above stated restrictions some investments are only made available solely through SMSF fund. Such investments include real property investments and collectables. Thus William Lee can buy shares in a golf club and buy a holiday home for the use of his family and friends. There are two categories of contributions which are made towards the SMSF. One of the contributions is known as concessional contributions which means that the salary deductions are taxed at a concessional on non-concessional contributions and a non-concessional contribution which is the after tax money that you contribute to your SMSF. Universally the utmost contributions that can be made in regard to concessional contributions are $25,000 and an utmost amount of $150,000 for non-concessional contributions. In most instances SMSF fund is established for a whole family. Since a SMSF have four members or less, so it is possible to set up a fund to cover ones whole family but in instances where the number in the family is more than four then all the family members cannot be members in the same SMSF. For William Lee since his family has more than four members thus they cannot be in the same SMSF. In an SMSF personal assets are usually protected from creditors. SMSFs are capable to offering protection from creditors for assets leased to the members of the fund. The protection mainly applies to assets such as business property and in some instances to in-house assets owned by the fund and is not available to the creditors of the fund members. In case one of the members goes into bankruptcy, his personal assets within the fund are cosseted from creditors if it can be established that the amounts were not moved in an aim to defeat the creditors. If it can be established that the amount was moved so as to defeat the creditors the amount can be clawed back under the reinforced bankruptcy legislation. For in instances where a fund member gets into a solemn monetary difficulty, their reimbursements in a fund are protected from creditors in the event that a member becomes insolvent. QUESTION SIX ATO’s Rights Under S 263 and S 264, ITAA 36 S 263 of the ITAA 1936 confers powers to ATO officers who are authorized by law that they should have full access to premises, places, any documents or even papers and books. The commissioners or officers are also in the position of making copies or obtaining extracts from the accessed books, papers and credentials. In addition, the commissioners and officers are not required to remain in the premises or places under S 263, if they fail to produce proof that they have been authorized to access the premise, credentials and books and which is signed by commissioners evidencing that the officers have been given authority to use the powers conferred to them under S 263. It is also the right of the person to who the commissioners or the officers want to access or have accessed their premises to endow all the relevant information and also give assistance to the ATO’s officers for the sole purpose of exercising their powers in S 263. S 263 gives powers to the ATO’s to have access to buildings without necessarily informing the occupiers of the buildings. The relevant documents to be assessed needs not to be brought by the tax payer, for even the accountant can avail the documents to the ATO’s3. While S 263, is a primary provision that gives powers to the Tax Office to have the access to premises and documents to the extent of making copies, S 264 on the other hand, is a provision that propels the Tax Office and gives it powers to oblige persons to endow relevant information and evidence the information that the Tax Office officers may require. In addition to complimenting S 263, S 264 is autonomous of S 263 provision where the Tax Office seeks to exercise the powers conferred to it under S 263. Therefore, S 264 requires persons whether they are actual tax payers or they are not the actual tax payers to avail information to the commissioner and which the commissioner may require4. The person(s) is also required to in addition to handing over the information to attend and verify either to the commissioner or an officer who has been given authority by the commissioner about a person’s income. The person(s) is also required under S 264 to provide to the commissioners relevant information in books, credentials or papers that may be in his/her custody or under the custody of the person being investigated by the commissioners. S 264 also stipulates that the information or the proof be given in writing or oral (verbal). In this case, the commissioner or the officer appointed and given the authority by the commissioner is the one to oversee the administration of the oath. The Rights of the Accountant Even though the accountant will be obligated to answer questions in regard to where documents, books, credentials and papers may be located, the accountant has the right to remain mum on questions which digress from where the documents are located. If such questions beyond the location of the documents are to be asked, the accountant will have the right to ask for a notice to be served to him or her. The accountant also has the right to seek legal advice regarding the ATO access to his/her premises without notice and the ATO must give the accountant a reasonable amount of time when the accountant is to seek legal advice5. The accountant has the right to claim “Accountants Concession” and he/she has the right to be informed by the ATO’s officers that such a right exists. The Accountants Concession relates to the documents that remain confidential between the accountant and the client. The accountant will have the right also of revealing information relating to the documents to which AC is claimed for he/she is the custodian of the documents. This information so revealed in AC documents allows the ATO in determining whether to recognize or defy the claim of AC by the accountant. The occupier of the building in this case the accountant will have the right to ask the ATO’s staff to identify themselves and the ATO staffs are to do so through presenting their wallet authority6. The accountant also has the right to inspect copies of access to the premise and the copies must be signed by the commissioner. In addition, sections of the legislation that allow the ATO officers to access the building without prior notice and the Taxpayer’s Charter, Fair use of Our Access and Information Gathering powers pamphlets should be presented to the occupier of the building, the accountant7. In the event that there are any copies of the documents made by the ATO, the accountant has the right to have a copy of the copied documents after the ATO officers are through with their access. Lastly, the accountant should also claim LPP as advised by Mr. Bond, the client. The Rights of the Client The client, Mr. Bond in stopping the ATO from accessing all the information in the office can claim LPP (Legal Professional Privilege). Any documentary communication between a client and a legal advisor is bound to draw legal professional concession which in common law is independent in its function. However, the independence of the legal professional concession is challenged in judicial and the quasi – judicial dealings where statutory requirements involves the disclosure of such information relating to legal advice between a client and the legal advisor and this also includes access to the information under S 263 ITAA 1936. However, S 263 does not overrule the LPP (Legal Professional Privilege)8 and Mr. Bond can rely on this issue to stop the ATO from accessing all the documents in the office. In this case, the client will be given sufficient time to also seek legal advice on matters relating to LPP and defend the right to access contained in the enactment S 263 and the rights of the ATO to gather information contained in S 264. The client can request the accountant to ask the ATO officers to be specific about the items that they seek to access, failure to which the client can defy the notice legitimacy in regard to S 263 and S 264. Works Cited Abbott, Grant. Guide to Self Managed Super Funds. Mulgrave: McPherson's Printing Group, 2006. ARC Report (Administrative Review Council Report), Principle 14. Australian Taxation Office (ATO), Guidelines to Accessing Professional Accounting Advisors’ Papers. Retrieved from http://www.ato.gov.au/corporate/content.asp?doc=/Content/51665.htm, Retrieved on 2nd December, 2011. Barker v Campbell 83 ATC 4606, F.C. of T. v Citibank 20 ATR 292; Heath, Paul. “Bringing trading trusts into the company line.” Oxford Journals 16.2 (2010) 690-704. 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