Description
Prior to 30 June of an income year, a directors meeting of a private company is held to consider the remuneration of the directors for that year. 2. The meeting resolves that directors fees of a specific amount be made payable to the directors of the company and the minutes reflect that the company is immediately, definitively and irrevocably committed to the liability in respect of these directors fees. 3. The meeting qualifies this resolution by further resolving that the directors fees be paid at a time to be determined having regard to future cash flow and that amounts be held in a directors fees payable account until payment is or can be made. 4. The company claims a deduction for the directors fees in the year of resolution but makes no payment to directors. 5. The directors do not include any amount in their assessable income until such time as the company pays an amount to them. 6. In the following year, the company makes nil or minimal payments to directors despite the company declaring profits and, in some instances, making loans to the director(s). 7. This practice may continue in later income years.