From excessive tax payments to substantial refunds: how using the wrong accountant can impact tax payments

BridgePoint Group Accounting was referred to a client who was in search of a new accounting service provider. They had already completed their financial and tax obligations for the previous financial year, but they casually mentioned that they felt burdened by a substantial tax payment. In response, we proposed conducting a complimentary review of their financial records from the past year to identify any apparent reasons for their excessive tax burden.

This client is a Fintech company in the software development sector, specialising in the creation of a banking platform that is utilised by banks in developing nations. Their business involves serving overseas customers across various countries, which resulted in the withholding of taxes on income earned in those regions.

Upon reviewing their financial statements and tax returns, it became evident that their previous accountant had neglected to claim credits for the taxes withheld in the overseas countries with which Australia has a Double Tax Agreement. This oversight led to the client paying over $200,000 in additional income tax for the year.

Further discussions with the client about the nature of their business unveiled that they actively engage in R&D activities, making them eligible for the R&D Tax Incentive. Since it was still March, the client had until 30th of April to submit their application to Austrade.

We took charge of preparing the application on their behalf, and it was successfully submitted. Following that, we conducted the necessary calculations to determinate the amount of eligible R&D expenditure. We prepared an amended tax return for the client, encompassing the appropriate withholding credits and the R&D schedule. This combined effort allowed the client to claim and receive a refund of approximately $400,000 for that particular year.

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Mitchell Turnbull

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