Not your typical accountant

By Heaney Business Group

It seems this is a very common perception of an accountant, but it couldn’t be further from the truth! Tax and accounting inspires us at HBG – shocking we know. Helping people through a transitional phase of their finances, or finding a solution to a more complex case is certainly inspiring for us. Even the straight forward tax and accounting jobs encourage us to utilise our skills to get the best solution for our clients.

What we really do as accountants is take on an ever-growing business advisory role, which essentially caters to the full business needs of our diverse clients. We partner with our clients help solve their business problems and offer advice on how to create more wealth and opportunity in their business.

So how can an accountant, or HBG, help you? Well, we can provide that sigh of relief and assurance of a job well done. You know that feeling of relief when something is completely taken off your plate? This feeling is strengthened with long-term relationships that we look to build with each of our valued clients.

At HBG, we are here to make our clients’ lives easier and we really enjoy the relationships we have with our clients, staff and local community. We work with our clients to solve any problem they may have, from dealing with the ATO to managing cash flow to marketing and human resource management issues. We pride ourselves on being able to meet our clients’ needs and to be seen as a true and trusted advisor.

If you are thinking about seeking advice, don’t hesitate to contact us. We aren’t your average backroom accountants and we would love the opportunity to get to know you and your business.

Should you have any questions about the how we might be able to help you, please don’t hesitate to contact our trusted tax accountants and business advisors.

 

P: 08 9594 1963

E: admin@hbgtax.com.au

Director’s fees: What and How to Pay Them

By Heaney Business Group

Can you pay a Director?

Directors who work in the company, executive directors, would generally have an agreed executive remuneration structure that takes into account their service including attending Board meetings (so, generally no extra fees for service outside of the agreed remuneration structure).

For non-executive directors, companies can only pay Director’s fees if the company constitution allows for it or a resolution is passed to make the payments. The resolution to pay directors fees must be made and documented prior to the fees being paid.

These fees are in addition to any agreed expenses such as travel expenses to attend board meetings or in connection with the company’s business.

Fees paid to directors are subject to disclosure requirements. Special rules exist for listed entities, not for profits, APRA-regulated financial institutions and specific advice should be sought for the management of director fees by these entities.

 

Tax deductibility of director’s fees

Fees paid to Board members are tax deductible to the company in the year they are paid or intended to be paid. Many Boards pass a resolution to pay Director’s fees just prior to the end of the financial year to claim the tax deduction in that same year.  The fees do not necessarily have to be paid prior to the end of the financial year but the Board must have definitely committed to paying them and then the fees paid as soon as practicable.

 

Tax on director’s fees

Assuming the directors fees are being paid through an individual contractual arrangement (i.e. the contract is with Mr Smith to act as a director, not with Smith Pty Ltd to provide ‘someone’ as a director, and that happens to be Mr Smith), then the directors fees are treated like salary and wages for the purposes of PAYG withholding. PAYG is required to be withheld from the gross directors fees, reported on the IAS or BAS that is used to report the salary and wages and related PAYG W for that period, and should be remitted to the ATO.

Director’s fees fall within the definition of Ordinary Times Earnings, and superannuation guarantee applies.

Director fees are required to be reported on a payment summary, and are generally reported at item 2 of an individual’s tax return. If they are not reported on payment summaries, it could result in errors in the PAYG withholding annual report, and queries from the ATO regarding the payments.

While the ATO may recognise that there can be a difference in the provision of services by and payments to directors (e.g. the contract may be for ongoing director services and attendance at quarterly board meetings, with payments of director fees to be made once a quarter, not monthly), the PAYG W and superannuation contributions are still subject to reporting and payment by the standard deadlines that apply for all other employees.

The directors fee should also be included in any workers compensation calculation and would generally be captured for payroll tax purposes as well.

 

Can Director’s fees be paid as super contributions?

Yes, assuming the proper process has been followed (e.g., effective salary sacrifice arrangement has been entered into before the fees have been earned), fees can be paid to the Director’s superannuation fund as a reportable employer contribution to utilise preferential tax rates.  This assumes the director is within their contribution limits.