At The Tax Institute’s March 2019 National Convention, in Hobart, Tracey Rens and Melanie Earl, both of the accounting firm, Deloitte, presented their paper, entitled: Sleeping giants & silent killers – Changes to accounting standards and the omnipresence of accounting on tax matters
The presence and focus on accounting and tax reporting practices adopted by businesses has changed significantly over the past few years as a result of the adoption of tax transparency measures on a global basis and significant legislative changes. Further, the introduction of new global accounting standards has resulted in a need for businesses to consider how changes in previously understood accounting methodologies impact the application of existing tax laws and tax reporting practices.
This paper therefore seeks to explore the impact of the introduction of AASB 15 (Revenue from Contracts with Customers) and AASB 16 (Leases) on businesses from a tax perspective.
In addition, we will address the existence and use of accounting practices and concepts as part of:
- Justified Trust and Streamlined Assurance Reviews;
- Compliance with the Voluntary Tax Transparency Code; and
- Preparation of General Purpose Financial Statements
Finally, we will go through common situations to highlight the significance of understanding accounting concepts and treatment in the determination of the tax outcomes.
- Different accounting positions can drive the tax characterisation of returns to shareholders and the ability to pay or frank a distribution.
- Accounting standards may require you to taint your share capital account.
- There is also an inconsistency as to when we have regard to the accounting treatment in determining the tax outcomes, at times the accounting treatment is wholly irrelevant and at others, definitive.
This can make it difficult to reconcile the tax law to core principles and has certainly stopped any meaningful effort to align tax and accounting outcomes to date.