Month: July 2025

As a small business owner in Australia, you’re likely focused on keeping your operations running smoothly, managing cash flow, and staying on top of your tax obligations. But with increasing sophistication in cybercrime and scams, it’s crucial to add another task to your list—protecting your business from tax scams.

The Australian Taxation Office (ATO) has warned businesses about the rise in tax-related fraud, especially during key periods like tax time. Scammers target small businesses by impersonating the ATO, exploiting gaps in cybersecurity, and taking advantage of time-poor operators. Here’s how to identify common scams and protect your business from falling victim.

Common Tax Scams to Watch Out For

Fake ATO Phone Calls or Emails
Scammers often pose as ATO representatives, claiming you owe a tax debt or that your ABN is at risk of being cancelled. They may demand urgent payment, often via untraceable methods like gift cards or cryptocurrency.

Red flag: The ATO will never threaten you with arrest, demand immediate payment, or ask for your financial details via email or SMS.

Phishing Emails and Texts
These messages often look official, using ATO branding and logos. They’ll ask you to click on a link to claim a refund, lodge a form, or update your information.

Red flag: These links typically lead to fake websites designed to steal your personal or financial data.

Business Identity Theft
Scammers can steal your business identity using your ABN or TFN and lodge false returns or claim refunds in your name.

Red flag: Unexpected ATO correspondence, unfamiliar tax transactions, or returns lodged that you didn’t authorise.

How to Stay Safe

Verify Communications
If you receive a suspicious message or phone call, don’t act on it immediately. Hang up or delete the message and contact the ATO directly through official channels to confirm the legitimacy.

Keep Your Systems Secure
Ensure your accounting software, anti-virus programs, and firewalls are up to date. Regularly change passwords and educate your staff about cyber risks and secure handling of financial data.

Use a Registered Tax or BAS Agent
Working with a registered accountant or tax agent, like Glance Consultants, means you have professional oversight and advice, reducing your exposure to fraudulent schemes. We can also act as a buffer between you and scammers by managing correspondence with the ATO.

Check ABN and ATO Records Regularly
Log in to your ATO Online Services or Business Portal to monitor activity. Regular checks can help you spot unauthorised changes early.

If You Think You’ve Been Scammed

Act fast. Contact your accountant or tax agent immediately. Report the scam to the ATO and, if financial loss is involved, notify your bank and the Australian Cyber Security Centre.

Stay Vigilant with Glance Consultants

Tax scams are becoming harder to spot, but staying informed and proactive is your best defence. At Glance Consultants, we help small businesses like yours navigate tax time with confidence and security. If you’re unsure about any ATO communication or need help strengthening your financial defences, we’re here to support you.

Need help? Contact Glance Consultants today.

If you’re a small business owner operating through a company, you’ve probably wondered: “Can I just transfer money from the company account to my personal one?”

The short answer? Technically yes – but not without tax consequences.

That’s where Division 7A (Div 7A) of the Australian tax law comes in. It’s one of the most commonly encountered – yet often misunderstood – areas of tax compliance for business owners. So, let’s break it down in simple terms.

What is Division 7A?

Division 7A is a set of provisions within the Income Tax Assessment Act that prevents private companies from making tax-free payments or loans to shareholders (or their associates). These rules ensure that funds taken out of a company are either treated as dividends or managed as formal loans, both of which have tax implications.

Why is this important?

Here’s the key takeaway: Money in your company belongs to the company – not you personally.

Even though you might own the business, the company is a separate legal entity. That means withdrawing company funds for personal use can attract serious scrutiny from the ATO.

The company itself may pay tax at the corporate rate of 25%, but when profits are distributed to you as a shareholder, they must generally be declared as dividends and taxed at your personal marginal tax rate – which could be as high as 45% with franking credits attached (company tax already paid).

Division 7A exists to prevent individuals from bypassing this by simply “borrowing” money from the business.

So, what happens if you take money from your company?

If you, or someone connected to you, takes money out of the company without proper structure, Division 7A could deem that amount an unfranked dividend, meaning it will be included in your taxable income – with no franking credits attached.

That’s a costly mistake.

Your Two Options Under Division 7A

If you take funds from your company for personal use, here’s what you can do to stay compliant:

1. Declare a Dividend

• Treat the amount as a dividend and declare it in your personal tax return.
• You’ll pay tax on the full amount at your marginal rate (less any franking credits).

2. Put a Compliant Loan Agreement in Place

• Create a formal loan agreement that meets Division 7A conditions.
• Repay the loan over:

• • Seven years if unsecured, or
  • 25 years if secured by a mortgage over real property.

• Make minimum annual repayments, including interest (e.g., 8.27% for FY2024).

For many small business owners, Option 2 is the preferred route as it provides more flexibility and defers the tax liability over time.

Using Div 7A with Paper Dividends: A Smarter Strategy

To avoid dipping into personal funds for loan repayments, many directors use a “paper dividend” strategy.

Each year, instead of repaying the loan out of pocket, the company declares a dividend that matches the required loan repayment. That dividend is then used to meet the Division 7A repayment obligation.

This approach can:

• Give you access to the funds upfront;
• Spread out the tax burden over several years;
• Allow income streaming (through a discretionary trust) to lower-tax-rate beneficiaries, where appropriate and compliant.

Case Study: How Division 7A Works in Practice

Let’s consider John, who owns 100% of her company, ABC Pty Ltd.

At the end of FY2024, the business has $400,000 in retained earnings. John transfers $100,000 to her personal account to pay his mortgage – without declaring it as a dividend.

His bookkeeper records the transaction as a director’s loan.

Without a compliant loan agreement, the ATO would treat this amount as an unfranked dividend. That means John could face a personal tax bill of up to $45,000.

Instead, his accountant recommends:

• Setting up a Division 7A loan agreement over seven years;
• Making annual minimum repayments (including interest);
• Declaring a paper dividend each year to cover the repayment.

In Year 1, the minimum repayment is $19,385. Rather than paying this out-of-pocket, ABC declares a fully franked dividend of that amount. John pays tax on the dividendwith the benefit of franking credits, defers the tax impact, and keeps the cash.

Even better, because the company is held via a family trust, part of the dividend is allocated to John’s retired mother – who is in a much lower tax bracket. This reduces the overall family tax bill.

Over seven years, John receives the cash today, spreads out the tax burden, and optimises who pays the tax.

Final Thoughts from Glance Consultants

Division 7A is more than just a tax technicality – it has real implications for how business owners access profits from their companies.

When used correctly, Division 7A loan arrangements can be a powerful tax planning tool.
When misunderstood or ignored, they can trigger unexpected and significant tax liabilities.

If you’re considering moving funds between your company and personal accounts – or have already done so – it’s essential to have an experienced accountant on your side to ensure you remain compliant and tax-efficient.

At Glance Consultants, we help small business owners navigate the complexities of Division 7A and create smart, compliant strategies to manage company profits effectively.