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Do you utilise the services of contractors in your business? If so, you need to be aware that the definition of an employee for superannuation purposes can differ from the definition of an employee for other purposes.
Recent court cases have expanded on what many thought was the distinction between a contractor and employee under the Superannuation Guarantee (Administration) Act 1992 (SGAA).
The Tax Office has been keen to use the expanded definition to take on employers. Therefore, it is important for you to understand the broad definition to avoid problems with the Tax Office and the potential for fines and other costs.
Firstly, some theory.
Section 12 of the SGAA defines an employee as:
(1) Subject to this section, in this Act, employee and employer have their ordinary meaning. However, for the purpose of this Act, subsections (2) to (11):
(a) expand the meaning of those terms; and
(b) make particular provision to avoid doubt as to the status to certain persons.
(2) ...
(3) If the person works under a contract that is wholly or principally for the labour of the person, the person is an employee to the other party to the contract.
Therefore, an employee/employer relationship exists beyond the ordinary meaning to include contractors engaged wholly or principally for their labour.
To assist business in understanding the distinction between an employee and a contractor, the Tax Office issued Superannuation Guarantee Ruling 2005/1 (SGR 2005/1). This sets out the Tax Office’s view on when a contractor falls within the expanded definition of an employee. The ruling sets out three (3) principal tests when a contractor will be considered an employee. These are if they:
- 1.are remunerated wholly or principally for their labour and skills
- 2.perform the work themselves (with no right of delegation)
- 3.are not paid to achieve a result.
The ruling notes that where an individual works through another party, such as a trust or a company, there is no employee/employer relationship between the individual and the other party for the purposes of the SGAA.
However, the recent case of On Call Interpreters sets limitations on the ability to rely on the use of a trust or company to circumvent what would otherwise be an employee/employer relationship for superannuation guarantee purposes.
Some of the other factors considered in determining whether a person is either an employee or contractor include:
- the terms and conditions of the contract
- control of performance of work to be done
- integration with business operations
- results test
- the right to delegation
- who is the bearer of risk
- the provision of tools and equipment.
Among the first things to be considered by the courts are the terms and conditions of the employment. This involves more than just the words used in the contract, so merely labelling someone as a contractor doesn’t make them one. The courts will always interpret the terms and conditions in light of the whole relationship.
Another test is whether the worker has some control over where, when and/or how they work. Generally speaking, an independent contractor has greater control over how and by whom the work is done, and when that work has to be completed. The greater the level of independence, the more likely it is to reflect a contractor relationship.
Another factor is often referred to as their “results test” and whether a contractor is employed to achieve a specific result rather than for the time they work. Traditionally, contractors were paid for obtaining a result rather than turning up and putting in hours. However, the courts will look through such a results test if they do not believe it is a true reflection of the employment relationship.
A further fact to consider is whether the contractor must perform the work personally or whether they can delegate the work. Having to do the work themselves would tend towards being an employee, whereas having the power to delegate would suggest a contractor. This is particularly linked to the previous results test, in that, if the contractor is engaged to achieve a result and can delegate work to another to achieve that result, or part of the result, this would give a stronger indication that a contractual relationship exists.
The question of who bares the risk and responsibility for injury or defect may be another factor in determining whether a person is a contractor or an employee. An employee generally does not bear the responsibility for personal mistakes or failures to obtain a result. On the other hand, a contractor will generally bear the financial risk for injury or poor work.
Traditionally, where a person provided their own equipment, tools and other assets they would be considered a contractor. However, the courts have been prepared to look past this to say the person is an employee. The courts will look at things such as what is the norm for that industry, whether there is compensation for the provision of the tools and other factors. Therefore, the mere requirement that an employee provide their own tools will not be demonstrative of a contractor relationship. It is just one of many factors that must be considered.
What is clear from SGR 2005/1 as well as the recent court decisions, is that the determination of whether a person is an independent contractor or employee is not a simple matter. The determination is based on a number of factors and the employee and employer/contractor relationship as a whole.
Should you wish to discuss how these rules might apply to your particular situation, please contact Ellingsen Partners.
Recent articles
January 1 was a significant date for many retirees. Not because it heralded a new year or the opportunity to commence those new year resolutions. It was significant because a number of changes were made to eligibility rules surrounding the Age Pension and the Commonwealth Seniors Health Care Card.
The tax law allows investors to choose between two methods of claiming depreciation on the fixtures and fittings in an investment property whether residential, commercial or industrial.
The Budget announced that small businesses (aggregate annual turnover less than $2m) would be able to immediately write-off assets they start to use or install ready for use, provided the asset costs less than $20,000 – the existing write-off threshold is $1,000.
The Government will allow all primary producers to immediately deduct capital expenditure on fencing and water facilities such as dams, tanks, bores, irrigation channels, pumps, water towers and windmills. Currently, the effective life for fences is up to 30 years, water facilities is 3 years and fodder storage assets is up to 50 years.
The Government has confirmed that it will allow small businesses with an aggregated annual turnover of less than $2m to change legal structure without attracting a CGT (Capital gains tax) liability at that point.
The Budget confirmed the Assistant Treasurer's recent announcement that the Government would introduce a grossed-up cap of $5,000 per year on the FBT concessions for salary-sacrificed meal entertainment and entertainment facility leasing expenses (meal entertainment benefits) for employees of certain not-for-profit organisations.
Only around 30% of small businesses are incorporated (ie around 70% are sole traders, trusts and partnerships), so the reduced 28.5% rate will have limited effect.
The Government will allow an FBT exemption for small businesses with an aggregated annual turnover of less than $2m that provide employees with more than one qualifying work-related portable electronic device, even where the items have substantially similar functions.
Perhaps you are thinking about making a superannuation contribution before 30 June in order to claim a tax deduction to minimise this year’s tax.
The purchase of precious metals as a self managed superannuation fund (SMSF) investment is growing in popularity.
On Tuesday night, the Treasurer Mr Hockey handed down the 2015-16 Federal Budget, his second Budget. The Budget Papers predict a deficit of $35bn next year, down to a $6.9bn deficit in another 3 years' time in 2018-19.
"Fly-in fly-out" and "drive-in drive-out" (FIFO) workers will cease to be eligible for the zone tax offset where their normal residence is not within a "zone". Currently, to be eligible for the zone offset, a taxpayer must reside or work in a specified remote area for more than 183 days in an income year. It is estimated that around 20% of all claimants do not actually live full-time in the zones.
Although “collectable” items are allowed as part of a self managed superannuation fund’s (SMSF) investment strategy, the laws limit the amount of personal enjoyment they bring to you personally as a member of a SMSF.
When it comes to protecting your income a lot of people assume they will be covered by their employer’s Workers Compensation policy.
The use of property options continues to grow in popularity. Property options are a form of property vendor finance which, up until that last few years, has been predominately used by large scale property developers to obtain the right to buy a property before a set future date for an agreed price.
The Government says that nearly 4 million Australians claim a work-related car expense deduction each year. Currently, there are 4 different methods by which taxpayers can claim the tax deduction for work-related car expenses based on cents per kilometre, logbook method, the 12% of original value method, and one-third of actual expenses incurred.
Recently we have received a number of queries regarding the implications of converting a main residence into an investment property.
The popularity of Self-managed superannuation funds (SMSF’s) continues to grow and grow and grow.
One of the best ways to fast track your property portfolio is to maximise your “borrowable equity”.
This article highlights one change which seems to have gone largely unnoticed.There is much hype in the media at the moment regarding what changes may or may not be made in this year’s Federal Budget in relation to the Age Pension.
The Government announced, with effect from the 2015-16 income year (ie from 1 July 2015), a 1.5% cut in the company tax rate applying to small businesses (turnover less than $2m). That would reduce the tax rate applying to those businesses to 28.5%.
he Australian Taxation Office (ATO) is urging trustees of Self Managed Superannuation Funds (SMSFs) to be ready for the 30 June 2015 deadline for SuperStream. From 1 July 2015 employers with 19 or fewer employees, will start sending SuperStream contributions electronically to all superannuation funds, including SMSFs.
Investment property ownership continues to grow in Australia. Many employees, whether it be of their own company or trust or unrelated employer, may have a residential rental property or multiple properties.
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Self-managed superannuation funds (SMSFs) remain one of the most popular vehicles when it comes to providing for one’s own retirement.
Well it’s the middle of February and Christmas is well and truly past us. However, many of you may have just finished or are still finalising your December quarter Business Activity Statements (BAS’).
What is the number one issue on the Tax Office’s agenda at the moment? Answer, are you a contractor or are you an employee?
On May 6 2014, the then Queensland Parliament passed four (4) Acts which replaced the Property Agents and Motor Dealers Act 2000 (PAMD Act). These are:
Like many things in life, the cost of child care continues to grow and grow. The Federal Government recently announced an overhaul of their planned Paid Parental Leave which will now focus on providing further relief to a family’s child care expense bills.
We received a query from a client last month proposing a strategy involving his investment property and associated offset account.
The Government has confirmed that it will allow businesses to immediately deduct a range of professional expenses associated with starting a new business, such as professional, legal and accounting advice. For example, expenses with establishing a company, trust or partnership.
We recently received a question from a client regarding the possibility of increasing the amount of interest he wanted to claim as a tax deduction.
The Tax Office has recently issued a fact sheet identifying industries where employers are at greater risk of not making super contributions for their employees.
You have probably heard that there are billions of dollars in superannuation savings sitting as “lost”.
I was recently asked to advise on the application of the pre and post Capital Gains Tax (CGT) rules to the sale of a property.
Following on from the earlier article regarding Super tips, this article provides a little more detail around the salary sacrificing strategy.
With 30 June fast approaching, we thought it would be an ideal time to highlight a number of well known and perhaps not so well known tips to boosting your superannuation.
From April 2015, the rate of Fringe Benefits Tax (FBT) will increase from 47% to 49%.
Changes to superannuation regulations now require the trustees of Self-managed superannuation funds (SMSFs) to consider whether or not the fund should carry insurance to cover their members.
When it comes to borrowing funds, there are many acronyms that are thrown around by lending institutions which are often misunderstood by borrowers.
With the growing popularity and growth in the Self-Managed Superannuation Fund (SMSF) market, it is inevitable that the interaction of the bankruptcy rules and SMSF rules will come to a head.
Australia’s largest credit reporting agency Veda recently introduced a personal credit rating score. Available to consumers for the first time, the VedaScore expresses a number between 0 and 1200 summarising your credit history at a specific point in time.
More and more homeowners are installing solar panel systems on their homes.
By now, most people in the “property world” know that you can purchase an investment property in a self-managed superannuation fund (SMSF) with borrowed funds.
As a reminder, effective 1 July 2014, the Medicare Levy increased from 1.5% to 2%.
Whether you are dealing with your own Self Managed Super Fund (SMSF) or any type of superannuation, you need to understand the contribution caps that apply tosuperannuation. Otherwise there is a risk that if you will contribute too much into super and end up with a nasty excess tax bill.
The rules governing what insurance may be held within a superannuation fund are changing.
We’ve all heard the saying “there is nothing certain in life except for death and taxes”.
Of late, a number of clients have contacted Ellingsen Partners to query the GST implications on the sale of their property.
There is now less than 6 months for businesses to prepare for the changes made to the Privacy Act.
If you have ever lived in a property and then began to rent it out to produce income, then the application of the “market value rule” is something you need to be aware of.
Chances are most of you would have never heard of a reversionary pension and a non-reversionary pension.
Did you know that excess tax of up to 93% can be payable if you contribute too much into your superannuation?
Last year ASIC introduced the Personal Properties Security Register (PPSR).
The Government has made amendments to provide tax certainty for deceased estates in a situation where a person has died whilst in receipt of a superannuation income stream/pension.
Once a taxpayer starts drawing a pension from their superannuation, a minimum amount is required to be paid each year.
Last month the Government announced their policy on FBT and motor vehicles titled “A fairer treatment for FBT on cars”.
The Self-managed Superannuation Fund (SMSF) supervisory levy is increasing.
When the time comes for you to approach a bank and apply for a small business finance application, it is standard practise for the bank to look at not only the businesses credit file, but also the owner’s individual file.
If you hold Private Health Insurance, you may have noticed that each adult covered on the policy received a Private Health Insurance Statement this year.
Under the proposed new National Consumer Credit Protection Amendment (Credit Reform Phase 2) Bill 2012, businesses, their bankers and their advisors will be required to think more carefully about the type of credit for which they are applying.
The Australian Business Register (ABR) is reviewing cancelling ABNs where records indicate holders are not conducting an enterprise and are therefore not entitled to an ABN.
In the 2013/2014 Federal Budget, the Government announced its intention to provide tax relief for companies by allowing them to carry-back tax losses so they receive a refund against tax previously paid.
A recent case has highlighted how the Tax Office utilises and applies the Small Business Benchmarks (SBBs).
Question: In a few years, my partner and I will turn sixty-five (65) and we are currently looking at retiring. Our source of income will be around $60,000 from our SMSF plus around $150,000 a year from our rental properties. Will we pay tax when we retire and if so how much? Furthermore, if we will be paying tax, how can we reduce it?
The Tax Office is requesting and collecting the user identification name and number, name, address, telephone numbers, date of birth, email address, registration date, number of monthly sales, value of monthly sales, the Australian internet protocol address and bank account details of approximately 11,000 sellers with sales of $20,000 and greater in the 2010/2011 income year through various online selling websites.
According to the Tax Office, many Self Managed Superannuation Funds (SMSF) are entering into the limited recourse borrowing arrangements (LRBAs).
Last month the Tax Office began writing to businesses in the building and construction industry to provide more information about the lodging of the Taxable payments annual report.
NRAS or the National Rental Affordability Scheme can provide tax-free incentives of up to $10,000 for ten (10) years.
There are times in a business where the business owner is no longer able to run the company which can leave the other business partners in a very awkward situation. Events such as death, divorce, retirement, bankruptcy or long-term disability can lead to a need to replace a business partner and acquire their share of the business.
If a rental property is jointly owned, each joint owner can claim an immediate write-off where their interest in a rental property deprecating asset is $300 or less, even if the overall cost of an asset exceeds $300.
More and more employers are incorrectly treating employees as contractors and asking them to obtain an Australian Business Number (ABN) so that they can reduce labor costs.
The Government has announced that it reduced the pension deeming rates from 20 March 2013 to benefit more than 740,000 pensioners by better reflecting returns available to them from their financial investments.
In what seems a surprising result, the courts have held that the date of disposal of a capital gains tax asset was the date the Heads of Agreement was signed and not when the contract was signed some four (4) months later.
I recently saw a person wearing a t-shirt which had Life = Risk in a large font on the front. If you think about it, there is a whole lot of truth in this slogan.
Moving to an aged-care home is often a challenging experience for all involved. These challenges can be made harder by the financial and regulatory minefield a potential new resident (and their families) has to negotiate.
Earlier this year, there was a court case (FC of T v Bamford) decided that has major implications for all small business owners and investors who operate via a discretionary trust.
Superannuation funds have until 31 May to transfer any balance that as less than $2,000 to the Tax Office.
If you have school-age children who need before-school or after-school care because you are working or studying, you may be able to get up to 50% of the fees back. Many people incorrectly assume that the childcare rebate is just for day care and don’t realise that they may be able to claim it for care outside of school hours.
Question: I purchased a property (property X) as my main residence in 2007 and purchased a second property (property Y) as an investment property five (5) years later in 2012. We intend to move into property Y and make it our main residence. We are thinking of selling property X. If we do, will we have to pay any capital gains tax? Property Y will then become our main residence. When we sell property Y, sometime in the future, will capital gains tax be involved? Alternatively, we could rent out property X. If we sell it later, will capital gains tax be based on the value growth of the house from when we rented it to the time we sell it?
The financial penalty for not taking out private health insurance by the time you are 30 is about to get nasty.
With the increase in red tape and liability now associated with being a director, we are seeing more and more people refusing appointments and considering resigning from current roles.
Question: I paid a $5,000 deposit to purchase an investment property. After a few months I withdrew from the contract of purchase because of some financial concerns. But I didn’t get my $5,000 back because of my withdrawal. Can I show this as a loss to the Tax Office and claim a tax deduction?
Recent Dunn & Bradstreet research shows that 62% of the businesses surveyed were settled late and more than 68% of the business owners said they expect to face cash flow challenges for their business in the coming months.
Well 1 July 2014 is now almost a quarter of the year behind us. Which means there is only a quarter of the year left in 2014!!
We’ve all heard the saying from US inventor, entrepreneur and politician Benjamin Franklin in 1789, “in this world nothing can be said to be certain, except death and taxes.”
Did you know the limits for contributing funds into superannuation increased from 1 July 2014?
Over the last five to ten years the number of property investment seminars being spruiked has continued to grow.
The Tax Office has updated the superannuation rates and threshold for the 2014 /2015 financial year.
SuperStream is a Federal government reform aimed at improving the efficiency of the superannuation system. Under SuperStream, employers must make super contributions on behalf of their employees by submitting data and payments electronically.
The mining tax has been repealed after passing the Senate following a Federal government deal with the Palmer United Party (PUP) to compromise parts of the legislation.
I was recently reading an article that highlighted the fact that ownership of investment properties has increased 40% in the last three or so years.
As a result of the recent storms and flooding resulting from ex-tropical cyclone Ostwald, the Tax Office have granted the following payment and lodgement deferrals:
One of the requirements for the going concern concession to apply, is that there is an agreement between both the purchaser and the vendor regarding the application of this concession.
Traditionally new businesses are not entered into the Pay As You Go Instalment (PAYGI) system until after they have lodged their first business income tax return.
This month we will start a regular question and answer article. Question: We have an investment property owing $400,000 and a mortgage on our home owing $600,000. What are the tax implications if we shuffle $200,000 from our home mortgage to our investment property loan to benefit us for tax returns and negative gearing?
When deciding to establish a self managed superannuation fund (SMSF), one of the key issues to resolve is who will be the trustee.
A recent Galaxy survey has found 53% of the 2.4 million members affected by the changes to the private health insurance rebate have not updated their income details with their private health insurance provider.
Earlier this year a raft of changes to the Tax Act passed through Federal Parliament that were to “protect workers’ entitlements”. In reality, they will have devastating personal consequences for well-intentioned business owners and directors.
If all you own when you die is personal debt, that debt will die with you. From there, it gets a little more complicated.
There are now less 6 weeks sleeps until Christmas and no doubt many of you (employers) will be planning your Christmas festivities. In addition, many of you (employers) will be considering what gifts you will provide to your clients and employees. As always, an important issue to consider is the possible Fringe Benefits Tax (FBT) and income tax implications of providing “entertainment” to staff and clients.
These days obtaining finance can be one of the most challenging components of a property deal. Perhaps you have already maxed out your borrowing power with other projects or perhaps you are just not keen on using your own money.
If your child is starting primary school or moving to high school next year make sure you don’t miss out on the Federal Government Schoolkids Bonus.
Cloud computing can offer businesses a great scalability and flexibility at a lower cost. But like any big decision, it’s important to be aware of any potential pitfalls.
It is very popular to bag the banks when they fail to pass on any of the official cash rate cuts as announced by the Reserve Bank of Australia.
According to Australian Property Monitors in the 12 months to 31 August 2013, a total of 185 properties were sold in the Gympie area at a median price of $235,000.
We are often asked to advise our clients as to whether they should nominate to receive either the Baby Bonus (BB) or the Paid Parental Leave (PPL).
A recent court decision highlighted the “best practice” of including a written agreement within the contract of sale in order for the GST going concern concession to apply.
I was recently reading an article highlighting the tax implications of renting out a granny flat.
It would appear that repeated warnings about the importance of having adequate insurance continues to fall on deaf ears. How often do we see news headlines where home owners and businesses lose everything to fire or some other extreme weather event yet this has done nothing to encourage Australians to check that their policies provide adequate cover.
The Federal Government will introduce a Dad and Partner Pay (DPP) for those who have a baby or adopt a child on after 1 January 2013.
Do you utilise the services of contractors in your business? If so, you need to be aware that the definition of an employee for superannuation purposes can differ from the definition of an employee for other purposes.
With the decline in the value of shares and properties alike, quite often we are faced with a situation where a client may have excess loan(s) left over after selling their shares or property.
In Ormiston’s case the house wasn’t considered to be available for rent because it was undergoing renovations. Nevertheless, most of its expenses were deductible.
If you’re considering purchasing a new car, you need to be aware of the potential application of luxury car tax.
The Tax Office has advised that, from 1 July 2012, the gross domestic product (GDP) adjustment used to work out quarterly PAYG Instalment amounts will be 6%.
I was recently asked by our local newspaper reporter what would be the single biggest claim I see most people not making in their annual tax returns. The answer was simple – investors not claiming enough, or any, depreciation on their investment properties.
Lost tax receipts cost one in two Australian taxpayers $1,000 in tax claims or $7.3 billion in total, according to a recent survey conducted by the Commonwealth Bank.
Lending of funds between entities is common amongst family groups.
The credit card provisions of the National Consumer Credit Protection Amendment (Home Loans and Credit Card) Act 2011 (NCCP Act), which came into effect on 1 July, aim to give consumers more control over their debt. However, not everyone will benefit in the short term.
Every time you apply for credit it gets noted on your credit file. But what’s not recorded is whether or not that application was approved or rejected by you. So, if you have been a fan of balance transfer credit cards or you have haphazardly applied for several home loans to see who would say yes, then according to your credit history you’re a risk.
The lending landscape fundamentally changed with the collapse of the financial markets in 2008.
Changes were recently made to the Self-Managed Superannuation Fund (SMSF) Supervisory Levy (the levy).
As a reminder, small business taxpayers can now write-off all depreciable assets costing less than $6,500 (GST-exclusive), currently $1,000.
The Government has recently introduced legislation that strengthens director’s obligations to ensure their companies meet their PAYG Withholding and superannuation obligations.
The Government has announced that it will make changes to its 18-week Paid Parental Leave (PPL) scheme.
Borrowing to buy an investment property isn’t the only option for a (SMSF) that wants to increase its exposure to real estate. An alternative is to buy a property with another investor(s).
The Australian Taxation Office has issued the Higher Education Learning Program (HELP), previously known as HECS, repayment thresholds for the 2012/2013 financial year. They are:
Many people incorrectly assume that their Will will dictate how their superannuation will be paid upon death. Your superannuation doesn’t automatically form part of your estate upon death and therefore may not be covered by your Will at all.
Non-resident taxpayers The personal income tax rates and thresholds that apply to non-residents’ Australian income will be adjusted as per the table below.
Perhaps you are thinking about making a superannuation contribution before 30 June in order to claim a tax deduction to minimise this year’s tax.
From 1 July 2013, individual income tax returns lodged electronically were required to provide bank account details in order for the Tax Office to process your tax return.
From 1 July 2012, businesses in the building and construction industry need to report the total payments they make to each contractor for building and construction services each year. You will need to report these services to the Australian Taxation Office (ATO) on the Taxable payments annual report.
Deferral of higher concessional contributions cap In the 2010/11 Budget, the Government announced an increase to $50,000 in the concessional contributions (contributions claimed as a tax deduction) caps for individuals over 50 with low superannuation balances. This measure has been deferred by two (2) years to 1 July 2014. Therefore, individuals will only be able to make concessional contributions of $25,000 per year.
Company tax cut. The proposed cut to the company tax rate has been scrapped.
The below tax rates were announced when the carbon tax legislation was enacted and were confirmed in this year’s Budget.
Treasurer Wayne Swan handed down his fifth federal budget projecting a surplus of $1.5 billion for 2012/13. The Australian economy is expected to grow “around trend” over the next two (2) years while real GDP growth is forecast to be 3.75% in 2012/13 and 3% in 2013/14.
With the ongoing uncertainty plaguing the share market, more and more people are turning to term deposits as a safe haven for their investments.
The Superannuation Guarantee (Administration) Amendment Act 2012 received royal assent on 29 March 2012.
In May 2010 the Government announced an instant asset write-off and simplified depreciation changes for small business.
Recently a chief executive from one of the major banks in Australia was reported as saying that depositors will be better off in the future.
Recently I sat down with a couple to discuss to purchase of an investment property.
The capital gains exemption for the family home isn’t an “all or nothing” concession. In many cases, a house can qualify for a part exemption even though it has been rented out or used as a holiday home.
If you’ve reached pension age but don’t qualify for the pension from Centrelink or the Department of Veteran Affairs, you may be eligible for a Commonwealth Seniors Health Card.
In our last edition we reported on a decision of the Federal Court in Commissioner of Taxation vs. Multifelx Pty Ltd regarding the prompt payment of GST refunds.
Many negatively geared property investors often find they’re short of cash because the rental income from their investments falls short of the cost of owning them. Many are often cash strapped due to the demand of their properties but want to continue to hold them. If the properties continue to grow in value, there is no reason to sell them off now.
The Federal Government is making changes to the Superannuation Guarantee (SG) from 1 July 2013.
Most Fuel Tax Credit (FTC) rates changed on 1 July 2012, so check that you are using the right rate when calculating your FTC entitlements.
The aim of many property investors is to acquire as many properties as possible. However, it is not necessarily a case of how many properties, but the collective value of those properties and what the loan-to-value (LVR) ratio which will determine what the cash flow from your portfolio will be.
Below are some statistics for Gympie’s property market taken from the most recent issue of Australian Property Investor.
Businesses can expect faster payments of GST refunds from the ATO as a result of a recent court ruling.
If you are eligible, you will shortly receive your Annual PAYG Instalment notice. This is despite the fact the instalment is not due until 21 October 2012.
Choosing a home loan is a big decision and comparing home loans can be tricky. The Government has tried to make it easier by requiring all lenders to provide a “home loan fact sheet” when you ask for one and to make them available on their website.
The Queensland Rural Adjustment Authority recently announced that they have cut their interest rates for the First Start and Sustainability loans.
I’m sure you’ve all heard people comment that customer service is not what it used to be. It is interesting that most businesses would say that having good customer service is their number one priority.
Credit card reforms are coming our way from July this year. The changes will force credit card lenders to allocate payments to clear higher-interest debts first.
Parents need to be very clear about who declares interest earned on their child’s savings accounts.
No doubt many of you have heard of Medicare. Basically, Medicare gives many Australian residents access to free or cheap healthcare. If you live in Australia, you are eligible for Medicare if you hold an Australian or New Zealand citizenship or have applied for or been issued with a permanent visa.
The following PAYG Withholding reports are due soon:
No matter what industry you are in, inevitably you will have debts that go delinquent and eventually end up requiring chasing. As the current economic climate continues, the amount of your debtors (the money owed to you) will grow and grow unless you put a system in place to keep on top of things.
Well it’s that time of the year again – back to school!! Many of you will be in the middle of purchasing all of the books, uniforms, bags, etc. ready for your children to start school later this month.
The Superannuation Guarantee (Administration) Amendment Bill 2011 was enacted late last year to provide for an increase to the rate of the superannuation guarantee (SG). The increase will be phased in as per the below table.
How many times have you been “advised” to drop your prices in order to win new business? Whilst we’re not saying this is “bad advice” how many of you know what the effect of discounting does to your bottom line?
On 29 November 2011 the Federal Government announced a number of changes relating to superannuation as part of its mid-year physical and economic outlook.
Did you know that new credit reporting laws being rolled out by the Federal Government will allow late payments to be noted on Australian credit files after one (1) day? This has the potential of disadvantaging millions of potential borrowers and seriously hurting the already struggling real estate and mortgage industries.
In February 2012, the Personal Properties Security Act (PPSA) is expected to commence thereby creating a single registry for security interests over personal property.
Capital gains tax (CGT) law now extends the main residence exemption to the compulsory acquisition of part of your main residence without the actual dwelling being acquired.
From 1 July 2011, tighter standards will apply for all collectables and personal use assets purchased by self-managed superannuation funds (SMSFs). This will ensure that investments are made for genuine retirement purposes and not for current day benefits.
Queensland primary producers may now be eligible for loans up to $650,000 for a wider range of activities to improve enterprise productivity and sustainability thanks to improvements to Queensland Rural Adjustment Authority’s (QRAA) loans.
Many small businesses these days operate through a discretionary trust with a company as trustee. This structure is the preferred option for a number of reasons, including asset protection and tax planning benefits.
With housing credit recently slumping to its lowest base in almost two (2) decades, banks are relying on a recovery in business finance to help drive their profit growth.
Each year, the Australian Taxation Office (ATO) increases your Pay As You Go (PAYG) Instalments using a formula that takes into account the expected growth in the economy. This is known as the Gross Domestic Product adjustment.
Did you know that there a billions of dollars in lost super currently sitting in the SuperSeeker system?
For the first time since the 2008/2009 financial year, the motor vehicle cents per kilometre rates have increased.
In September 2007 the law governing self-managed superannuation funds (SMSFs) was amended to allow SMSFs to borrow to purchase assets (subject to certain conditions). The conditions of the arrangement are:
If a person purchased their main residence on or after 20 September 1985 and they died and it passed to a beneficiary after 20 August 1996, the beneficiary is taken to have purchased the property at its market value at the time it was first used to produce income if:
Accountants are not known for their marketing skills, so it may sound strange to be reading about marketing in a newsletter from an accountant. Whilst we are far from experts in this field, we know marketing applies to all types of business, irrespective of their size.
As a small business owner, how often have you been asked “How is business?” If you are like the vast majority of small businesses in Australia, you will probably answer that you are “doing it tough”. This time of uncertainty is a good opportunity to re-evaluate your business and to give your company a financial health check. A business’ financial fitness is one of its biggest assets, so we thought it would be appropriate to provide a few tips to help get your business “back in shape”.
Many of you may have heard of the Personal Property Securities Act (PPSA) or the Personal Property Security Register (PPSR) which came into existence on 30 January 2012.
Whilst we are the first to admit we are no IT experts, we are called on from time-to-time to assist our clients in setting-up or upgrading their existing computer systems.
There are only twenty (20) sleeps until Christmas and no doubt many of you (employers) will be planning your Christmas festivities. In addition, many of you (employers) will be considering what gifts you will provide to your clients and employees. As always, an important issue to consider is the possible Fringe Benefits Tax (FBT) and income tax implications of providing “entertainment” to staff and clients.
Small businesses have long complained about having to do the government’s dirty work. Whilst there is no sign it will stop being the collector of the GST any time soon, it is at least being offered help for its other chore as the organiser and payer of everybody’s compulsory superannuation contributions.
If you do not qualify for a full exemption from CGT (refer last month’s article), you may be entitled to a partial exemption. You calculate your capital gain or capital loss as follows:
If you inherit a deceased person's dwelling, you may be exempt or partially exempt from CGT when it is sold.
It may surprise you to know that two (2) of Australia’s most publicised economic indicators – Unemployment and the Consumer Price Index (CPI) – are actually based on surveys.
The Australian Taxation Office (ATO) has recently released two (2) draft rulings which will have implications for many of our readers.
It goes without saying that much is happening in the not-for-profit (NFP) sector. Recently we have seen the Australian Accounting Standards Board (AASB) release its “Reduced Disclosure Regime” standards with many NFP entities considering early adoption. We have also seen the Corporations Act amendments for company’s limited by guarantee and the Auditing and Assurance Standards Board (AUASB) release of updated guidance on auditing fundraising revenue.
The Australian Taxation Office (ATO) has released its Compliance Program 2011/2012 outlining the key areas attracting its attention for the coming year.
Various Australian Securities and Investment Commission (ASIC) fees are indexed each financial year, based upon the Consumer Price Index (CPI) for the March quarter immediately before the start of the next financial year.
Traditionally July, August and September are some of the busiest times of the year for most accountants as they look to process the salary and wage tax returns for their clients. The objective is simple – to maximise any tax refund owing to their clients. Ellingsen Partners is no different. If you are looking to have your salary and wage tax return prepared (or no somebody who is) please contact us. We charge a flat fee of $75 (inc. GST) for salary and wage tax returns, which includes anyone with a rental property.
Did you know that you can contribute too much to super? In fact, it can result in you having to pay extra tax.
Generally, if you build a house on land you already own, the land does not qualify for exemption until the dwelling becomes your main residence. However, you can choose to treat land as your main residence for up to four (4) years before the house becomes your main residence.
In our July newsletter we began considering what a business plan was and also what purpose it fulfilled. As promised, this month we will look at what actually goes into a business plan.
The Federal Government has announced that it will undertake a review and rewrite of the complex area of trust tax law.
For most business owners, times are tough. You are either struggling to “make a sale”, or you are struggling to get paid for that sale!
The Australian Taxation Office (ATO) has announced that it will collect information on amounts paid by 39 labour hire firms, placement agencies and computer consultancies.
If you purchase a new home before you sell your old one, both homes are treated as your main residence for up to six (6) months if:
$281 million in additional tax-free payments to encourage apprentices in critical trades
From 1 January 2012, the maximum rate of Family Tax Benefit Part A will increase for 16 to 19 year olds.
Budget deficit estimated to be $49.4 billion for the 2010/11 financial year, decreasing to $22.6 billion for the 2011/2012 financial year.
Effective, 1 July 2011 the Government will provide eligible individuals who breach the concessional contributions cap by up to $10,000, with a one-off option to request that these excess contributions be refunded to them.
No changes to personal tax rates, but don’t forget the flood levy starts from 1 July 2011!
Calculating the best price to charge for your product or service is perhaps one of the biggest issues you face as a small business owner. If you price too low, you will be out of business before you know it. If you price too high, you are out of the market. Get your pricing just right, and you will maximise your profits.
As we head towards to the end of the financial year, it is a good time to consider your tax position. This applies both to the business owner and the individual salary earner. Below are a number of “tax tips” that you should consider.
If you start using part or all of your main residence to produce income for the first time after 20 August 1996, a special rule affects the way you calculate your capital gain or capital loss. In this case, you are taken to have acquired the dwelling at its market value at the time you used it to first produce income if all of the following apply:
The April to June period each year is seen by most accountants as the most significant time of the year. Why? Once midnight 30 June rolls around, not much more can be done to minimise your tax position.
In last month’s edition, we looked at a case study of a business that had major cash flow management issues.
Many small business owners don’t need convincing when it comes to outsourcing their accounting or marketing. It makes sense to use experts in their respective fields and in the long run it will save you time and allow you to focus on your core business.
If a CGT event happens to a dwelling you acquired after 20 September 1985 and that dwelling was not your main residence for the whole time you owned it, you are only entitled to a partial exemption.
Do you know of anyone looking for an office to operate their business from?
If your house has been anything like mine during the last 3 weeks, you will know that school is back!
By now I’m sure you have heard that the Federal Government proposes to introduce a levy to help pay the damage bill caused by the floods in Queensland and Victoria.
In our last newsletter, we advised that unless a determination is made to the contrary, we would expect that the Special Disaster Flood Assistance Grants ($5,000 and additional $20,000) would be subject to GST and income tax.
Following the Queensland and Victoria floods, the Tax Office has announced a number of initiatives to assist those affected by the flood.
In addition to your main residence being exempt from capital gains tax, the land “adjacent” to the dwelling is also exempt if:
Unless a determination is made by the Tax Office to the contrary, we would expect both income tax and GST would be payable on the freight subsidy and the special disaster flood assistance grants.
The State Government has announced the following assistance initiatives:...
The Federal Government has announced the following assistance initiative:...
As a reminder, if you are an employer and required to pay superannuation on behalf of your employees, you are required to make the payment within 28 days following the end of each quarter i.e. 28 January 2011 for the 31 December 2010 quarter.
The following factors may be relevant in working out whether a dwelling is your main residence.
Have you received your December 2010 PAYG Instalment notice in the mail? Do you think the amount is excessive given your trading so far this year?
Australia’s first national Government funded Paid Parental Leave (“PPL”) scheme is now law. The scheme kicks off from 1 January 2011 and provides mums or dads with 18 weeks of pay at the minimum wage.
Yet again the Tax Office are on their soapbox regarding the employee v independent contractor debate. A recent series of cases has made it very clear that the day of the “independent contractor” is numbered. These cases involved market research interviewers, translators and a cutter and sewer.
Many of you employ workers and therefore issue payment summaries (previously known as group certificates) to your employees. Hopefully you would have noticed a change to the 2010 payment summaries.
From 1 July 2010, the fuel tax credit rate for diesel or petrol for use in heavy vehicles (GVM of greater than 1 tonne) on public roads was reduced to 15.543 cents per litre.
From 1 July 2009, the law changed in regards to the definition of income for a wide range of Centrelink benefits. Now any net investment losses or net rental property losses are “added back” to your taxable income to arrive at the figure on which benefits are calculated. As a result, many people are now receiving less benefits.
Businesses today operate in an extremely complex environment. A simple ratio will not be able to take into consideration all of the underlying complexities of a business and the issues it faces. Ratios should be utilised as a starting point, or as indicators to be investigated further.
Generally, if you are an individual you can ignore a capital gain or loss from the sale of your main residence. To get the full exemption from Capital Gains Tax (CGT):
Unlike with business assets, there is no rollover or exemption for a capital gain when you sell a rental property and put the proceeds into a superannuation fund or use the proceeds to purchase another investment property.
This month we begin a series of articles focusing on Capital Gains Tax (CGT). To begin, we will concentrate on the CGT rules as they apply to real estate.
On the 1st March 2010, the Tax Agents Services Act 2009 (“the Act”) regime commenced.
According to Tax Office research, few taxpayers are aware that there are limits on how much superannuation can be contributed by any one person throughout a financial year where a tax deduction is sought.
Those of you who are drawing superannuation pensions, either from your own self-managed superannuation fund or a public-offer fund superannuation fund, will know that the Government reduced the required minimum pension to be drawn during the 2009 financial year.
