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Contractor obligations for business owners

Posted on October 23, 2019 by admin

Contractors bring with them different obligations that business owners need to comply with. Employers that incorrectly classify employees and contractors can face hefty penalties and charges as well as claims for entitlements and superannuation contributions. It must be established whether they are employees or contractors to get tax and super requirements right. When hiring an individual contractor, the contractor may wish to enter a voluntary agreement for owners to deduct PAYG withholding amounts from their payments. This arrangement helps the contractor manage their tax by making contributions towards their expected income tax liability. Employers will need to check whether a contractor is eligible for super guarantee and if they can choose a super fund. If so, employers will need to; Give the contractor a Standard choice form (or equivalent) within 28 days of them starting, so they can nominate their preferred super fund. Check that the fund they’ve nominated is a complying fund. Give their tax file number to their super fund the next time you make a payment for them, or within 14 days, whichever is the later. Set up an electronic system to report and pay your super contributions using SuperStream. Business owners will generally need to withhold […]

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Do you need to pay superannuation for contractors?

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A contractor can turn into an employee for legal and financial obligations, so when working with contractors, employers need to test whether they count as an employee or contractor for superannuation purposes according to the rules stated in the Superannuation Guarantee (SG). The ATO states that even if contractors quote an Australian Business Number (ABN), they are identified as employees for superannuation guarantee purposes if they are paid mainly for their labour. Employers must make superannuation contributions to these workers if they are being paid: Under a verbal or written contract where more than 50% of the dollar value of the contract is for their labour. For their personal labour and skills and not to achieve a result. To personally perform the contract work and not delegate the work to someone else. If any of the above criteria are not met, then employers may not have to pay superannuation. The minimum amount of super that needs to be paid is 9.5% of each worker’s ordinary time earnings (OTE), which is what employees earn for their ordinary hours of work such as commissions, allowances, bonuses, and shift loading. Employers who attempt to avoid financial and legal obligations to workers by disguising […]

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What are the tax implications for different business structures?

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The structure of your business determines how you would pay tax and other business obligations you would need to consider. Whilst you are able to change your structure as your business develops, business owners must keep up with the changing tax responsibilities that may occur as a result. There are four major business structures in Australia that come with different tax implications. Sole trader:An individual running a business will declare revenue received from the business as part of their personal income tax return and will be taxed at the same rate as an individual. This means the more the income the business earns, the more tax the sole trader will have to pay. If their income is $18,200 or under for the 2018-19 financial year, then they are under the tax free threshold and do not have to pay tax. They can also receive a discount on Capital Gains Tax (CGT). Partnership:When more than one person runs a business and distributes income or losses between themselves, each partner must pay tax at the individual tax rate on their share of the business’ net income. They also need their own Australian Business Number (ABN) and Tax File Number (TFN) to use […]

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Start saving for the Christmas period early

Posted on October 16, 2019 by admin

If shopping centres aren’t even putting up their Christmas decorations yet, then the holiday period may seem to be a concern of the distant future. However, the season has a tendency to creep up on people and can often come with financial burdens. Planning your holiday expenses early can cut out one of the biggest stresses of the season and allow you to focus on enjoying the festivities and spending time with your loved ones. If you’re worried you’re going to be tempted to dip into your savings, it can be a good idea to set up a Christmas saver account. This is typically done at the start of the year and is offered by some banks. You can make deposits throughout the year, but can only withdraw from the account when the festive season arrives, usually around 1 December. While interest is offered on these account savings, it should be noted that you can generally find better interest rates with other savings accounts such as a bonus saver or online savings account. Alternatively, you can manually set aside an amount weekly or fortnightly in the months leading up to the holiday period. Setting up an excel sheet can help […]

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Knowing when to cut a product

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Businesses looking to improve their profitability may need to consider cutting under-performing products and services that are unnecessarily draining resources. It might be time to discontinue if a product fits the following scenarios: Low profitability. Stagnant or declining sales volume or market share. Maintaining your market share is too costly. Risk of technological elimination. Poor fit with business’s strengths or declared mission. When deciding whether to discontinue a product, there are a few ways you can examine your services and make the decision that is best for your business. 80/20 rule:This rule states that businesses should focus their attention on the 20% of the products that generate 80% of revenue. Using this principle, companies should compile a shortlist of the products and services that bring in the most profit and scrutinise the products that fall short of this mark. Trial run:Try going a week to a month (no longer) removing all promotion and marketing for a product. This can help the business to visualise what it would look like without that service and see if there are any clients who miss it. Harvesting:Cutting the costs associated with the business or increasing the price of the product without increasing production or […]

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Super law changes to NALI and LRBA

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Integrity measures included in Treasury Laws Amendment (2018 Superannuation Measures No. 1) Bill 2019 have now been enacted with an effective date of 1 July 2018. There have been amendments made to non-arm’s length income (NALI) provisions and Limited recourse borrowing arrangement (LRBA) amounts will now be included in total superannuation balance (TSB) calculations. NALI provision amendments:From the 2018-19 income year onwards, the ordinary or legal income of a super fund will be NALI and taxed at the top marginal rate. This has been introduced to ensure SMSFs and other complying superannuation entities cannot evade the NALI rules by entering into schemes involving non-arm’s length expenditure, including where expenses are not incurred. Any capital gains from a subsequent disposal of an asset may also be treated as NALI. LRBA amounts included in TSB calculation:Where an SMSF has an LBRA that was made under a contract that has been entered into on or after 1 July 2018, the calculation of an individual’s TSB will now include any outstanding LRBA amount attributable to each member’s interest. This will apply if: The LRBA is with an associate of the SMS. In this case, all members of the fund whose interest is supported by […]

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GST margin scheme

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The margin scheme is a way of working out the GST you must pay when you sell property as part of your business. The amount of GST normally paid on a property sale is equal to one-eleventh of the total sale price. If the margin scheme is used, the GST is calculated on the difference between the sale price and your purchase price of the property or the property’s value. You can only apply the margin scheme if the sale of the property is taxable. When purchasing a new residential property with the margin scheme being apart of the property transaction, withhold 7% of the contract price, including GST and the market value of non-monetary consideration. This amount will then be paid to the ATO at settlement. The margin scheme is not an automatic concession and the sale must be eligible for it to be applied. The margin scheme can be applied to subsequent property sales depending on the original date of purchase and how GST was applied at that time. Property purchases prior to 1 July 2000 are eligible, as the property had not been subject to GST previously. For property purchases after 1 July 2000, the margin scheme […]

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What employment type is best for your business?

Posted on October 9, 2019 by admin

Each employment type has different entitlements and obligations that must be met by both the employer and employee. Before hiring a new worker, take the time to look at what each employment type would mean for you and your business. Full-time and Part-time employees:Though both permanent employees, a full-time employee will work an average of 38 hours a week whether as a part-time employee would work on average less than 38 hours a week, usually at regular times. The specific working hours in a week are agreed upon in the employee contract. Under the National Employment Standards (NES), there are 10 minimum entitlements that need to be provided to employees; Maximum weekly hours. Requests for flexible working arrangements. Parental leave and related entitlements. Annual leave, 4 weeks of annual leave are given every year based on ordinary hours of work. Leave that is left over at the end of each year carries over to the next year. Personal/carer’s leave, compassionate leave and unpaid family and domestic violence leave. Employees receive 10 days of this leave every year. Community service leave. Long service leave. Public holidays. Notice of termination and redundancy pay. Fair Work Information Statement. Casual employees:A casual employee does […]

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Treasury Law Amendment for super measures moves forward

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The Treasury Laws Amendment (2018 Superannuation Measures No.1) Bill 2019 has passed both Houses of Parliament and reached royal assent on 2 October 2019. First announced in the 2018-19 Budget, the Bill allows eligible individuals, whose income exceeds $263,157 and have multiple employers, to nominate wages from certain employers to not be subject to the superannuation guarantee (SG). Individuals with more than one employer, who expect that their compulsory super contributions will exceed the annual concessional contributions cap for a financial year, will be able to apply for an exemption certificate to release some of their employers from their SG obligations. Individuals will still need to receive SG payments from at least one employer. From 16 October 2019, eligible individuals will be able to download an application form from the ATO. The application will need to be submitted at least 60 days before the start of the quarter in which you wish to receive the exemption. The lodgment period for the quarter commencing 1 January 2020 has been extended. Applications lodged on or before 18 November 2019 will be accepted. The application form provides the Commissioner of Taxation with the information required to make an assessment. This includes which employers […]

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Breaking down business industry codes

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A business industry code (BIC) is a five-digit code you include on relevant tax returns and schedules that describes your main business activity. BICs come from the Australian and New Zealand Standard Industrial Classification (ANZSIC) codes and are added to by the Australian Tax Office (ATO) for tax return reporting purposes. Employers must use the correct business industry code on their tax returns to ensure their return is lodged in the right category. Using the correct code for your business helps to reduce the risk of being incorrectly targeted for compliance activities, avoids processing delays and ensures employers receive services and information relevant to their business type. The business industry code describes the main activity of the business. This can change over time if your business diversifies its products and services. The code is broken down into sections: ANZSIC system is first divided into 19 divisions, described by one letter (A to S). Divisions are broken down into subdivisions numbered with two digits. There are a total of 96 subdivisions. Subdivisions are broken down into groups. Each group is numbered with three digits, with the first two digits derived from the subdivision to which it belongs. Groups are broken down […]

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Using your tax return wisely

Posted on July 8, 2019 by admin

Getting your tax refund back is exciting, but as tempting as it is to splurge, consider other ways you can put that money to good use. It is easy to get caught treating your return as extra money when you shouldn’t see it any differently than your regular paycheck. Give the money a purpose by thinking about your personal financial situation and determining your needs.

Emergency fund:
An emergency fund can make all the difference if a difficult financial situation comes up, acting as a backup in the case of an emergency such as losing your job or medical costs. Building an emergency fund with enough money to cover at least three months worth of expenses is a good starting point. Make sure the money is added to a high-interest savings account to utilise compound interest. If you are contributing regularly to this fund, adding money from your tax return can boost it above schedule.

Make debt repayments:
With a bit more money at your disposal, now is the time to make repayments on debts you may have. Start with the higher interest debts and work down, your interest repayments will drop when you lower your outstanding balance. These debts can be things like credit cards, personal loans, outstanding bills or mortgage repayments.

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