Many accounting firms offer an audit insurance policy as an optional extra for their clients.  It is just about time for Jigsaw Tax’s policy to renew and we will no doubt get many questions from our clients about the need for this policy.  Given that we have been through a year with many self-assessed benefits being provided (particularly Jobkeeper), we are strongly recommending to our clients that they consider taking out a policy.  Here is a simple explanation about what audit insurance provides.

What does audit insurance cover?

First, you need to understand what the insurance covers.  The insurance is not in place to prevent you from being audited, it is in place to cover the costs of your accountant helping you through the audit process.  It does not cover the result of the audit either.  If the auditor finds a shortfall in the tax/superannuation/workers compensation you have paid requiring you to pay the shortfall, possibly with penalties and interest, you will still need to pay that.  Effectively it covers the cost of your accountant’s time, and other professionals they may ask to assist in your audit case.

Do not expect your accountant to act for free if you are audited.  This is additional time that your accountant will need to spend on your behalf and they will charge you for it.  If you have audit insurance it is likely this time will be covered by the policy.  If you don’t have audit insurance you should expect to pay for this service.

Audit insurance typically covers audits that arise from the ATO and other government agencies.  It covers audits for wage obligations, payroll tax and workers compensation.  Make sure you read your policy to understand what is, and what is not covered by the policy.

What if I don’t take out the policy?

The policy is completely optional, and like any insurance you run the risk that if you are not insured you will need to pay for the costs yourself.  We take out car insurance even though we hope we will not have a car accident.  Similarly, you can take out audit insurance in the hope that you will not need to draw on it.  If you do get audited, it is nice to know it is there.

If you don’t have audit insurance you can either handle any audit yourself, or you will need to pay for the services of a professional to help you.  Most audits take a number of hours (probably 3-4 at a minimum) so the cost is certain to exceed the insurance policy cost.

What are the benefits of having a professional help you with an audit?

From personal experience you will get a better result if you have a professional help you with the audit.  Your accountant understands what the auditor is looking for and can help to negotiate lower penalties.  They also know how to speak in the language of the auditor, and what not to say.  I have seen clients mention things to auditors that get them into more trouble.  We know what evidence is needed to argue for the view that was taken and we know when to concede that something was wrong and ask for leniency on your behalf.

Another major benefit is that it saves time and stress.  If someone else can pull the information together that saves you valuable hours which can be better spent running your business.

Do I need to be worried?

The Government have committed to over $500 billion in 2020 providing stimulus support to all areas of our economy.   This is money that Australia does not have and it will take years to recoup through an efficient tax system and increased wealth (Gross Domestic Product) in the Australian economy.

The ATO released statistics on the Tax Gap (if you want to find out more about the Tax Gap read my article indicating that in 2017-18 over a third of the tax gap came from small business.  This equates to $11.1 billion.  It is clear that with better use of information the Government will be targeting small business so they can close this tax gap.  Take this as a gentle warning – audit is going to be a big issue over the next few years.

We are concerned that people have applied for Jobkeeper without going through the myriad of tests that were required.  We know that businesses are struggling and sometimes that means bending the rules a little or missing compliance obligations.  We understand that compliance it difficult and that it is easy to make mistakes or forget to lodge something.  We are also seeing an increase of businesses being reported to the ATO for not doing the right thing, which typically results in an audit.

Insurance is a method of risk mitigation.  You cannot ‘insure’ that you will not be audited, but you can insure so that your audit will be handled in a professional way without cost constraints.  At Jigsaw Tax we will be recommending that our small business clients, particularly those who received Jobkeeper, take out audit insurance this year.

Jigsaw Tax & Advisory have staff who specialise in managing ATO audits.  This team is managed by ex-ATO auditors who understand how to communicate with the ATO in an effective way.   We do this not only for our own clients but also on behalf of other firms.  If you are interested in this service, please get in contact with Jigsaw Tax & Advisory and we can discuss your needs.

December 2020 has shown us how quickly things can change in this pandemic ridden world we are living in.  In mid-December we took our team to Wollongong for a training conference and Christmas dinner.  We felt very confident doing this as there were no cases of COVID-19 pretty much anywhere in Australia at the time.  We had a staff member fly in from Queensland and could confidently blend our offices from around NSW and the ACT.  We left our conference feeling excited about the prospects ahead in 2021.

Move forward 3 weeks and the virus is silently spreading its tentacles throughout Sydney and the anxiety starts to return.  Residents of the Northern Beaches have been in lockdown and masks are mandatory for indoor public spaces in Greater Sydney.  Borders are closed and I cannot visit our Canberra office without quarantining for 14 days. The desire to leave the house has diminished and I am quite happy to stay at home in my relatively safe bubble.

As business owners we need to be mindful of these uncertainties as we make plans for the 2021 year.  What impact could a potential shutdown in your area have on your business and your financial situation?  It is very unlikely that we will see the same sort of stimulus measures that were rolled out in April and May again.  We need to take time to plan for the next unanticipated event.

In many ways we have been incredibly fortunate.  We have had unprecedented government support, low numbers of COVID-19 cases and our economy has performed better than anticipated.  The Government is encouraging us to make investments in our businesses by providing tax incentives but before you go ahead and make that large investment (which in many cases is a new vehicle) you need to know if you can really afford it.

Have you ever prepared a cashflow budget for your business?  If you have, how long since you looked at it? You need to look at what has changed and you need to be able to see the impact a reduction in your sales will have on your bottom line.  Do you know how long your business can run without any income?

We are now 6 months through the financial year and it is a great time to take stock of your performance for the first six months.  Compare it to your performance for the same six months of 2019, and the first six months of 2020 when COVID was in full swing.  Can you notice any trends?  Are there expenses that are no longer necessary?  The numbers do tell us a story but in order to read that story you need to make sure the numbers are accurate.

What are the pain points of your business and is there something you can do to address these pain points in the next six months?  Perhaps it is time to update your systems and move to an easier to use platform.  Perhaps you need to address the issues you are having with collecting from your debtors.  Maybe your staffing levels are not correct.  Each business has its own unique set of challenges.

Too often we see clients who jump into big financial commitments without taking the time to understand the impact.  A good accountant should be more than a number cruncher, they should be able to provide you with advice.  They should be able to help you to navigate the opportunities and challenges your business faces.  Many businesses see the accounting costs as a necessary evil, but what if the advice that the accountant is giving you provides tangible benefits to your business?  Wouldn’t you be prepared to pay for that advice?

The unpredictability of 2020 showed many businesses the value of their accountant as they helped them through the financial crisis of COVID-19.  I believe that 2021 is going to be just as unpredictable.  I do not have a crystal ball so I can’t predict what the future will hold for your business, but I can help you to understand your numbers, I can help you to make business decisions and I can help you to be prepared for whatever is to come.

Make 2021 the year you get serious about your business and accept that paying for advice from a professional is a great investment, even if it is not as exciting as buying a new ute.

In 2021 Jigsaw Tax and Advisory will be offering advisory services to our clients.  There will be a cost to these services in addition to your compliance fees, but we feel the one-on-one attention from a Partner or Senior Accountant will be a great investment for your business.  If you are interested in this service please contact Emily Roper ( for more details.

Every Monday I start my week with an early morning Reformer Pilates class.  It is a lesson in vulnerability and personal strength as I manipulate my body in challenging new positions that I thought I would never have been capable of.  This morning the only thing preventing a spectacular fall from the machine was a fluffy band and my will and strength not to embarrass myself. I saw this as a metaphor for life right now, particularly business life.  I don’t know if my body can do the exercise that I attempt because I have never done it before.  The outcome is unpredictable, but I try it anyway.  We are running our businesses in this strange time with a level of vulnerability we have not seen before.  To succeed we must trust in our own strength and instinct.


I am sure COVID-19 has taught us all many life lessons and it is going to teach as so many more as this pandemic lingers as a disruptive force to our life for many years to come.  One thing that it has taught me more than anything is that life is completely unpredictable and trying to learn to deal with this unpredictability is a critical new skill to learn.

I think we all find comfort in predictability, even those who like to think of themselves living an “unpredictable” life.  In business, predictable is a necessary thing.  We create budgets, make plans and decisions all based on the fact that what we know from the past will be recreated into the future.  Right now, it feels that some of that has gone out the window.  As a business owner this can cause stress and anxiety, particularly for those who are working in an industry that has been highly impacted by COVID-19.


One of my husband’s favourite sayings is “let’s just see what the tide does”.  While I love this reference to surf culture and a free lifestyle sitting on a beach somewhere, it is can also be rather infuriating for someone like me, an accountant.  While there are unpredictable elements of my job, overall we know that our workflow goes in cycles and we can set out targets based on these cycles.

We are fortunate in that at this stage our work has only become more intense as a result of Jobkeeper and the other stimulus measures.  Compared to so many businesses out there we have nothing to complain about, but even with a level of predictability we are having difficulty making business decisions.  We are not sure how many of our clients will survive.  We are not sure how many of our clients will be able to afford to pay our invoices.  We are not sure how long it will take for those invoices to be paid.  In the back of our minds we are also concerned about staff getting sick and the impact that will have on us meeting our client’s needs. There is definitely an element of “seeing what the tide does” in our business at the moment.

This, however, is no excuse not to plan.  If anything, it means planning is more important that ever.  Planning now needs to account for unpredictability as well as predictability.  Your “what if” analysis has a whole bunch of new factors to consider.  Now is the time to be savvy about your business, to tighten your procedures, to enhance the customer experience and introduce better technology to give you a competitive advantage.


As a starting point take 15 minutes to write down your concerns about your business in this unpredictable time.  This may include loss of customers, staff unable to work, your customers going into liquidation meaning higher bad debts, or the fact that you simply cannot work as the government has closed your business.  Then start to formulate a plan to tackle this if the worst does happen.  We are fortunate to have some government support at the moment but this is not going to last for ever.  We need to be making plans for a business life after the support drops off.  That business life may look different to what it has looked like in the past.

No one knows where this pandemic is going to take us and honestly, it is OK to be looking one day at a time right now.  I am sure no business plan written in 2019 factored in a global pandemic.  What is predictable is that we will survive this and one day life will return to normal, even if that normal looks different to what we have known in the past.  People will still need to eat, be entertained, be clothed and housed.  Trade businesses are still going to be in strong demand.  Taxes are still going to need to be paid and most business owners will need someone to help them prepare those taxes.  What that will all look like into the future we do not know, so we need to adapt as the new models for doing business emerge.  It will be survival of the fittest, so be the fittest.  This means you need to be nimble and have great systems so you can adapt.


Tomorrow is unpredictable, and so is the day after that, and the day after that.  Unpredictable is starting to be predictable itself.  Strong business owners will learn to live with this and find ways to make the most of it.

Explaining how a Trust structure works to a client who does not have a legal or accounting background is difficult.  In fact, explaining a trust to someone who does have an accounting background can sometimes be difficult as well.  Trusts are complex beasts.  I spent a semester of my Masters degree intensely studying the topic of Trusts.  I have read many books and been to conferences specifically about Trusts, yet I definitely would consider myself an expert.  It is completely OK to think that Trusts are complicated because they are.

I want to share with you the way I explain Trusts to my clients.  This is an intentionally simple explanation.  I am aware that there is so much more to know, but I also feel that understanding the basic concept is a critical stepping stone in your journey to become the proud owner of a Trust.

Let’s go back to Ye Olde England

Trusts started back in 12th Century and relate to the King of England and The Crusaders, but I prefer to explain trusts as they would have been used in Jane Austin times.  I may be taking some creative liberty with this story, but I think it helps get the message across.

Back in those days, women were not able to own property in their own names.  This caused a dilemma for the wealthy landowner who only had daughters.  What would happen when he passed away?  How could he leave his property to his wife and daughters when they were not legally able to hold the title to the property?

Enter “Old Mate” down the road, the landowner’s trusted friend.  What if he left the property to “Old Mate” who could be the legal owner of the property, with an agreement (based on the landowner’s trust of the moral fortitude of “Old Mate”) that he would do the right thing by the women family members?  They could live in the property and benefit from any income the property would derive without any legal entitlement to do so. There is a distinct reason that the word “trust” is used!

Essentially a Trust is just a relationship.  The relationship between the Trustee (Old Mate) and the Beneficiaries (the wife and daughters).  The relationship between the legal owner and those who should reap the benefits of the assets of the trust.

In current time

Return from the times of Pride & Prejudice and think about your own trust structure and how it works.  The Trustee is likely to be a company (a Corporate Trustee) or it may be some individuals.  The rules that define the relationship between the Trustee and the Beneficiary are formalised in a document called the Trust Deed.  The Trust Deed names the beneficiaries of the Trust, explains the powers of the Trustee, and outlines the operating rules for the Trust.   If you do have a Trust, take half an hour to read your Trust Deed.  It will be riveting reading (I know), but it is a very important document.

Our court system has come a long way since the days of the Crusaders and now it is the legal obligation of the Trustee of a Trust to act in the best interests of the beneficiaries.  This is known as a fiduciary duty, the requirement to put another person’s interests in front of your own.

The Settlor

There are a few more concepts and roles that you need to be aware of so I will try to explain them as simply as I can.  A trust must be settled over a piece of property and the person who provides that property is known as the Settlor.

In our Ye Olde England example, the Settlor would have been the landowner who was giving the property to Old Mate to create the Trust.  I appreciate that may have been part of a will, but let’s just set that aside for this example and assume he created the trust prior to his death.

In today’s typical Trust set up the Settlor is often a lawyer, accountant or friend who is generous enough to give the trust a sum of money (usually $100 – $500) to start the trust.  Once this act of generosity has been performed, the Settlor has no further role in the Trust.  Most Trust Deeds specifically say this – so please don’t think your lawyer or accountant has somehow wormed their way into your family business or investments by being the Settlor.  In some states (eg NSW), stamp duty is payable on the trust property when the trust is settled, and that is why you keep the trust property amount low.  You don’t want to inadvertently settle a Trust on a large value and end up with a high stamp duty charge.

The Appointor (or Principal)

In your Trust Deed you will find reference to the Appointor or Principal of the Trust.  This is the person who has the power to replace the Trustee of the Trust.  Typically this role does nothing, but it does have the ultimate power.  If the Appointor is not happy with the Trustee – they can be replaced.

Vesting Date

Unlike a company that has an unlimited life (until you choose to wind up a company), a Trust has a limited life.  The termination of a Trust agreement is called the Vesting Date and this will typically be 80 years after the start of the Trust.  On that date the Trust should be “vesting” the assets to at least one of its beneficiaries.

What is a Discretionary Trust?

There are many variations on Trusts but I will discuss the two most common forms of Trust – the fixed Trust (Unit Trust) and the Discretionary Family Trust.

A Family Trust is considered “discretionary” because the distribution of the income of the Trust, or the assets of the Trust is as the “discretion” of the Trustee.

A Family Trust Deed will list some named beneficiaries, and then the family relationship to those named beneficiaries that will allow us to find potential beneficiaries.  Allowing additional beneficiaries based on a family relationship stops you from having to change the deed as the family dynamics change.  Potential beneficiaries can include parents, grandparents, children, grandchildren, siblings, aunts, uncles, nieces and nephews.  There is a large net that can be cast to find the potential beneficiaries.  You do not need to name your children in the deed as they will automatically be potential beneficiaries.

To some people this sounds scary.  What about that crazy cousin who may want to get their hands on your money?  The key to all of this is that although they can be beneficiaries to your trust, there is no entitlement to anything without the Trustee exercising their discretion to distribute to that beneficiary.  Your investments are safe from that crazy cousin.

If you have distributed income to someone and the money has not been paid to them, they do have a legal right to that money.  This is called an unpaid present entitlement.  The entitlement is limited to the amount you have distributed to a beneficiary.

The Fixed Trust

As a business owner you may want to use a Trust structure but you have a business partner who is not related to you.  You can’t use a Family Trust as you are not part of the same family.  You will also want some assurance of your share of the assets of the Trust.  In this instance you would have a Unit Trust.

As the name implies, the beneficiaries are issued Units and the number of units indicates the unit holder’s share of the assets and income of the Trust.  It is very similar to a company, except the income must be distributed to the unit holders each year.

Distribution of Income

The Trustee of a discretionery Trust does not have to distribute the income of the Trust, but any undistributed income is taxed at the highest marginal tax rate.  As such, it is usually in the best interests of the beneficiaries that the income is distributed to at least one beneficiary.

The distribution of taxable trust income will be taxed in the beneficiary’s tax return at whatever their marginal tax rate is.  Be cautious about distributing to children under the age of 18.  Tax rates on minors are much higher than the tax rates of a grown up to discourage parents from putting investments into their children’s names.

If a trust is running at a loss you cannot distribute the loss.  It will stay in the trust to be offset against future gains.

ABN’s and Trading Names

My final point in this simple explanation (which probably doesn’t seem so simple now that I have written it) is about the logistics of trading through a Trust.

The legal name of the Trust is the Trustee’s name, as Trustee for (which is abbreviated to ATF), the Trust name.  As an example, my trust is Jigsaw Accounting & Taxation Services Pty Ltd ATF Jigsaw Family Trust. Yes, it can be a tongue twister and it is not something you want to write 100 times a day.

While you will open your bank account with this name, you are entitled to use the Trustee name as your business name or trading name.   In my example, I trade under Jigsaw Accounting & Taxation Services Pty Ltd.

Your Trust will have its own Australian Business Number (ABN) if it is running a business, and its own Tax File Number.  When your supplier looks up your ABN it will refer to the Trust name, not the Trustee name.  Trusts are common structures and you are not trying to hide anything or do anything dodgy by using a Trust as your business entity.

Hopefully this has shed some light on something that is very complicated.  As I mentioned, there is a whole lot more information available and I could talk about Trusts for hours, but a simple understand is better than no understanding at all.  If you have questions, please speak to your accountant or lawyer.


For decades, accountants and tax authorities have grappled with how to value, trade and eventually tax intangibles. Over time, we’ve come up with ways to effectively manage intangibles such as brand names, rights, trademarks, systems and even how much a business is valued by an owner, over and above the tangible assets – goodwill.

Cryptocurrencies have create another shift in the world of financial, tradeable and intangible assets. Banks, regulators, market participants are all starting to adapt to the emergence of various cryptocurrencies.
Thankfully, the Australian Taxation Office, never wanting to miss an untaxed profit, has provided some initial guidelines (note that this has not been tested in court, and the final outcome may be different to the ATO’s view).

Here’s a summary of the most common scenarios:
– If you purchase and operate a cryptocurrency business (Am I in business?) then all gains and losses will be taxable under normal income rules. This would be similar to a day trader who has a volume of transactions
– If you pay for goods using Bitcoin, any gain or loss will be disregarded if you total investment is under $10,000.
– If your holdings are over $10,000, then you will need to declare the gain/loss under the Capital Gains Tax regime. If you’ve held the cryptocurrency for over 12 months, you may be entitled to the 50% CGT concession or apply against capital losses.
– In some circumstances, an SMSF may invest in cryptocurrency as a medium/long term asset, but additional regulations apply. The current rule of thumb is that cryptocurrency should not be more than 3-5% of the SMSF’s total investment portfolio – a financial planner will need to be consulted to review and amend your investment strategy.

Each situation must be treated on its own merits and some may require clarification from the ATO:
– does the $10,000 limit count towards a specific currency (Bitcoin, Etherium, etc.) or across the whole portfolio;
– what if I buy lots from Kogan using BTC, do I need to pay tax on the gain?
– what if I purchase a currency in my testamentary trust?
We hope that ATO will continue to work with accountants to answer some of these questions – but it is clear that the ATO will be taxing some of the large 2017/18 profits.

One question is how will the ATO know, if cryptocurrencies are anonymous – remember there is always a paper trail when you convert to AUD via your bank/Austrac for international transfer. The simple answer is, that the ATO can find you – which is especially concerning since the ATO advised 2 weeks ago of a specialist audit team:…

Technology is a great way for businesses to increase productivity and stay relevant in today’s economy. But individuals and businesses need to be aware that today’s technology can leave you vulnerable to cybercrime if you don’t take the right precautions. It’s highly recommended by industry experts that you use two-step verification (i.e. a two-step log-in process) to protect your individual and business interests.

One of the most important things we want our clients to know is how to keep their information safe. Unless you are using the best security technology available to protect yourself, you are vulnerable to hackers. Security technology like two-step verification is your best line of defence against cybercrime.

This is especially crucial for business owners. A lot of the time, business owners store their clients’ personal information in their systems as well as their own, and therefore have a duty to keep their clients safe. Two-factor authentication on systems like Xero means that, even if several staff use the same account or password, the account is still protected by a randomly generated code.

Two-step verification means that you can only log onto your account on a new device using your trusted devices, most often phones. For example, when you try to log into your Gmail account on a new device, a number will appear on the screen of the new device. You will receive a notification on your trusted device asking you if you are trying to log in, and if you go into the Gmail app it will prompt you to select the number displayed on the new device out of three options.

If it’s not on already, hit this link to turn on 2-step verification for your Google account, and use this link to do it for Microsoft.

Apple devices

Although “two-factor authentication” and “two-step authentication” are usually interchangeable, Apple uses the terms to For Apple devices, the iOS 11 software update will include a feature called “two-factor authentication”, which will allow you to request an offline authentication code to be generated on a trusted device using Settings. Two-step verification and two-factor authentication are very similar, in that they both shift the focus away from passwords and onto randomly generated number keys. However, two-step verification allows you to receive a code from Apple via SMS, while two-step authentication means that only a trusted device can generate the code.