Brumby’s deal with the Tax Office

The Brumby’s franchise and the Australian Tax Office (ATO) have agreed to trial an arrangement that delivers administrative tax concessions for franchisees and which potentially could set the model for future arrangements with other franchise chains.

The arrangement requires Brumby’s 300 franchisees to meet their existing reporting obligations of weekly shop reports and monthly profit and loss statements as well as lodging and paying their tax on time.

In return the ATO will reduce the period in which people need to keep business records for tax purposes from five to three years; be less likely to conduct intrusive reviews or audits; and provide potential concession treatment in relation to penalties for any tax shortfall amounts where people have made a genuine attempt to comply.

According to the bakery franchise managing director, Michael Sherlock, the arrangement recognises businesses with good compliance behaviour and reliable internal controls.

“In return the Tax Office provides them with administrative concessions,” he says.

Brumby’s and the ATO will evaluate the trial in six months to ensure the arrangement is working effectively. Under the arrangement, Brumby’s will conduct assurance reviews to ensure integrity of the records and reports by franchisees.

“By giving this assurance to the Tax Office that franchisees are observing all their record keeping and reporting obligations, we have achieved significant concessions for our franchisees in meeting their administrative tax obligations,” Sherlock says. “It is a major breakthrough that will hopefully be able to be duplicated beyond Brumby’s.”

In another development, investment group River Capital executive director, Paul Cowan, has joined the Brumby’s board. The move comes after River Capital purchased 258,900 shares in August, which followed an off-market purchase in February of 816,000 and a further purchase of 488,449 shares in April.

River Capital, which holds strategic positions in both Australian and international businesses, is now Brumby’s largest individual shareholder controlling 14.96 percent of Brumby’s shares, up from just 1.7 percent at the beginning of February.

Brumby’s fourth largest individual shareholder, Marcus Barlow, has also joined the Brumby’s board. Cowan and Barlow fill vacancies created by the departure of board members Bob Snow and Tom Brigstocke.