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61

Yes. Legislators make the law, the judiciary interprets and enforces it. What we have is a deficiency in legislation.

Company structures were developed (in part) to shield entrepreneurs from the worst consequences of failure, the intent being to encourage prudent risk-taking. Over the centuries, the concept has grown somewhat corrupt. The corporate veil has become something of a shelter. Too often, business people get away with behaviour that is (or should be) criminal. The question is; to what degree should the veil be lifted?

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62

That is barely what the petition says though - and if the law were changed, it ought not be retrospective.

There are criminal penalties involving jail time (max 10 years for a given offence) imposed by the ANTI-MONEY LAUNDERING AND COUNTER-TERRORISM FINANCING ACT 2006 however not, I think, for any of the specific contraventions that are alleged in this case.

For a bit of fun, from the statement of claim: “The backup solution in Westpac’s record keeping system was not correctly configured, resulting in the loss of records.”

I know that Bank Bashing is one of Australia’s national sports and it will be an exhibition sport at the 2034 Commonwealth Games but jail time for incorrectly configuring some backup software? I think not.

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63

And should we accept trial by (social) media… by those who don’t know the details of the case or the circumstances, including mitigating factors.

The action being taken by Austrac hasn’t been heard or tested in court. Australia affords individuals and organisstions the presumption of innocence until proven (by the court) guilty.

This is a very slippery slope to go down, especially if the government accepts and responds to the petition. The days of judicial separation of powers from government will be gone.

This is bush lawyer territory where anyone with a gripe (even if it is unfounded or based on supporting evidence) will make a petition to get their own way. Is the judicial system we want in the future. I would say that it is not.

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64

I think the BRC showed quite adequately the lack of shall we say compliance by Banking Institutions with the requirements already in place and their uncaring guilt in some cases. Bank bashing perhaps but also requiring a most important and now intergral part of our everyday lives to be truly and clearly seen to be accountable.

The Minister who oversees the arms of the Govt which implement the Laws and policy is not inappropriate to petition, while the petition is lacking in some of it’s requests the thrust of the desire is quite plain. People want more than fines to an organisation when it fails severely. If the Minister acts to change laws that don’t then shelter the ones who allowed or oversaw blatant failure to be held personally accountable then this is a great outcome. Now a member of a Board can be prosecuted for Company Financial failures (and this took many failures to get action taken…so many hurt in the meantime) and this should be extended to when system failures lead to gross outcomes as seen in the CBA, Westpac, NAB etc cases. Perhaps then we will have greater responsibility being taken about a number of issues such as cyber security and timely disclosure of failure in the organisations, billing the dead, providing no service and so on.

Sometimes very rarely Retrospective Law is required, perhaps something that needs looking at if failures continue.

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65

Didn’t you get the memo? Not any more.

Anyway, that’s why I asked whether Westpac are pleading guilty because if they are pleading guilty, it is reasonable to treat them as guilty.

It would indeed be very disturbing if guilt or innocence were determined by petition.

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66

More news regarding Worstpac.

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67

Can’t say that I accept the excuses.

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68

Assuming that the failures were really at the board level. As I have already said, surely this couldn’t have been done without someone lower down knowing what was going on - which means therefore that it could have been done while concealing from the board the unlawful part.

If this is primarily a board issue, I wonder whether the Corporations Act could be amended to limit the number of boards a director sits on. While not all companies pay non-executive directors “north of $250k” (and remuneration is a complex area anyway as some senior staff will be paid a mix of cash and non-cash remuneration) I don’t expect too many of them would go hungry if there were some limits. This would be difficult to draft though when you have to take into account different types of incorporated entity and different types of company and different sizes of company.

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69

A lot of Boards share the same members and even families who sit on Boards.

To take on the responsibility of a director requires that the person does take the steps needed to ensure they understand how the Company is operating:

https://asic.gov.au/for-business/small-business/starting-a-company/small-business-company-directors/

"As a director, you must be fully up-to-date on what your company is doing, including its financial position, question managers and staff about how the business is going and take an active part in directors’ meetings.

When you make a business decision as a company director, you must, amongst other things, ensure that you:

  • make the decision in good faith and for a proper purpose
  • do not have a material personal interest in the decision and make it in the best interests of the company
  • find out and assess how any decision will affect your company’s business performance, especially if it involves a lot of the company’s money or could have a material impact on the company’s reputation
  • keep informed about your company’s financial position and performance, ensuring your company can pay its debts on time
  • get trusted professional advice when you need assistance to make an informed decision
  • make full and frank disclosure about any material personal interests you do have"

https://asic.gov.au/for-business/running-a-company/company-officeholder-duties/your-company-and-the-law/
"

What you need to do as a director

As a director or officeholder, your key duties include:

  • being honest and careful in all your dealings
  • understanding what your company is doing
  • making sure your company can pay its debts on time
  • ensuring your company keeps proper financial records
  • acting in the company’s best interests, even if this conflicts with your personal interests
  • using any information only for the good of the company. Using information to gain an unfair advantage for yourself or others could be a crime.

If you have any personal interests that conflict with your duties as a director, you should disclose these at a directors’ meeting.

What does a director’s work involve?

A director’s job is to manage the business affairs of a company. Your company’s constitution (if you have one) may set out a director’s powers and functions.

One of your main duties is to understand what your company is doing at all times. You need to:

  • find out how any proposed actions will affect the company, especially if it involves large amounts of money
  • question managers and staff about aspects of the business if you need to
  • be active and engaged in directors’ meetings
  • get independent advice if you need more information to make an informed decision.

You should only agree to be a director if you understand your responsibilities and are willing to carry them out."

There are penalties but they are seldom meted out to the larger Companies Directors

https://asic.gov.au/for-business/small-business/starting-a-company/small-business-company-directors/company-director-liabilities-when-things-go-wrong/

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70

The Betoota Advocate is once again getting into real news.

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71

On the positive side, this will be taxed at 47% (inc. Medicare levy), whereby if it remained as company profit, it would be taxed at 30%. At least the taxpayer gets an additional 17% benefit which otherwise may not have been the case.

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72

On the cynical side his actual post tax take home handshake is only about 15-20 years of the average bloke’s wages.

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73

Not if he puts some of it through his SMSF, and/or via a trust or similar ways of reducing the tax paid. At the level he got/gets paid you can also believe he will have the accountants who know how to minimise tax paid to the n th degree.

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74

If this occurs, only the first $25,000 would he subject to 15% tax. The remainder would be at the highest tax rate. As the income is high, any money added to the smsf would be taxed at the highest marginal rate.

From what I understand, as it is salary from Westpac if would be taxed at the (highest) marginal rate…Westpac, the employer, will be taking the tax out prior to payment.

I understand that he is not a contractor (his employment agreement is with Westpac)…where the trust may have been used to minimise tax.

Any trust would impact the tax paid after payg tax is taken out and a rerurn on the money from investment occurs.

75

No, they can contribute more in Non Concessional $100,000 per year with a 3 year option ie one, two or 3 contributions in a 3 year period not exceeding $300,000 for which they are not claiming a income tax deduction against the remainder of their income. There are of course limits based on the value of the Super Fund now. Above the limits it will be taxed at 47%.

The $25,000 is concessional payments, normally these are employer contributions but they can be personal contributions for which an income deduction is going to be claimed to reduce tax on other income.

Depending on his employment contract to which I’m not privy he may have his income directed to a trust.


"Discretionary trusts – the most common form of trust – are especially rich in tax perks. Most family trusts are discretionary.

They allow breadwinners on high tax rates to split their income and distribute it to family members on low or no incomes, and low tax rates – adult kids at university for example.

The distribution of income can be varied each year. So, if a child leaves university and gets a well paid job their share can be transferred to little brother starting university, or a retired grandmother.

So, a discretionary family trust allows a rich miner or manufacturer – with the right tax agent – to minimise or even extinguish their tax bill by promising money to his kids and his parents. The money doesn’t even have to change hands, only the tax bill."

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76

There are exceptions. Any super balance which is above $1.6M non-concessional limit is $0. Being a high income earner for many years, it is highly (looking at publically available salary information) likely that the grossed up compulsory super contributions would be greater than $1.6M.

It would be interesting to know if directors responsibilities allow income diversion through trusts, as it reduces director liabilities which may be an issue to say creditors such as the ATO.

Anyway, the income to the trust if theorically possible, would still be taxed at about 30%.

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77

As I don’t know where his SMSF or in fact any other Super scheme is located it may be outside of Australia’s jurisdiction? Only on Australian schemes I think would he be subject to those rules. I just don’t know, but I know overseas funds such as 401K or British National Insurance could allow greater contributions and avoid our taxing.

The Trust one…no it could be much less than 30% or even nil depending on the allocations within the Trust.

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78

My understanding is it can’t be done…the super has to be formed or registered under the relevant Australian legislation.

Even temporary residents, which the former Westpac chief may be, is caught by the super contributions net. Whike the super can be released when departing, it will be post tax.

My understanding is income distributions are taxed at the recipients marginal tax rate. Say, if a wife doesn’t work when the first $180K would be less than 47%, at each marginal rate and any money thereafter would be atthe maximum rate.

The ATO/government have also clamped down on more recent (past decade?) to also close loopholes for newer formed trusts. I suspect as being from the US, he would fall into new arrangements.

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79

From a document on Foreigners working in Australia and this in particular to foreign Super plans:

"127.Given the caps on contribution limits for Australians since 1 July 2007 and the removal of concessions for foreign nationals, the pendulum has swung back in favour of foreign pension funds. The absence of limits (within reason) and effective tax rates as low as 30% now mean funding of foreign pensions has a certain attraction to mobile expatriates, albeit home country tax rules do need to be taken into account. For US citizens and Green Card holders, careful analysis of unused tax credits are an important factor.

128.In light of the complexity of the foreign superannuation rules, please consult your PwC advisor before making any decision in relation to foreign superannuation. When dealing with foreign pension funds, wills and the naming of beneficiaries and trustees, it is of paramount importance to address both home and host country tax rules."

On Trusts
The marginal tax rate for a income below $16,000 would start at 0% only if they are adults (minors are taxed differently unless they work for the income). So it would depend on those who are in the Discretionary Trust and how the income is disbursed (paper wise) to those beneficiaries…remembering no actual income needs to be received by them it is just a paper figure, he could have Mother, Father, Wife, Sons, Daughters, Brothers, Sisters, the in-laws etc listed and disbursed to on paper.

Those wealthy enough spend huge amounts to reduce tax debts to nearly nil, do I think he gets that advice…I do and I think he likely takes the advice as well. That advice also becomes a deduction. Some gifting here and there even while being spent altruistically also may be used to reduce marginal tax rates on beneficiaries such that the deduction is worth more to reduce the tax not paid than was spent on the gift. I am also mindful he may have a foreign Trust and how this is treated for income tax may be even harder for the ATO to unravel. I think in the end he will pay little to even perhaps nil Tax here. His US taxation may be different but again would depend on how his tax affairs have been moulded by his tax advisors.

He may also split his Australian Super (if he has any) with his spouse thus reducing Tax payable particularly if the spouse has no income that attracts Super contributions thus a further $300,000 non concessional plus $25,000 Concessional payment.

Add in some negative gearing, franked credits, the benefits to paying as little tax as can be are achievable. What a “normal” salary/wage earner can do is vastly limited to what the very rich can achieve.

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80

If this information is still current, this is potentially a loophole the government should explore in relation to temporary Australian residents.

Looking into Brian Hatzer further, I was mistaken believing that he was a US citizen. Information publically available indicates that he is an Australian citizen (albeit US born) who has worked overseas including the US and Scotland…so the foreigners working in Australia super provisions may not apply in his case

This is now $18200. Any income from the trust would be assessed based on the individual’s marginal tax rates:

image

As the ‘retirement’ income would have been unexpected, it is highly likely that if there was distribution within a trust, that the trust members incomes would have been set to minimise tax based on continuing employment. The payout would have thrown a significant spanner in the works and would have been unplanned, and likely to have a significant impact on this years taxable incomes.

That is true, but as indicated above, it is likely this was being done for existing income when employed. The payout would have been unexpected and may not have been allowed for in such calculations, meaning that opportunities for such may not exist.

Also, my understanding is the max $300,000 non concessional is post pax and not pre-tax…so income tax at the relevant marginal rate would have already been taken prior to depositing into a super cacdoint.

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