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Employee or contractor?




Employee or contractor?
12 common myths






The Tax Office says that it has encountered several myths and assumptions adopted by both workers and employers
when it comes to trying to decide the tax status of a job appointment. It found that employers continually rely upon
some inaccurate factors when making distinctions about what makes a worker an employee or contractor
and therefore the tax treatment that applies in these cases.  
Here are 12 common myths the Tax Office says can often get both businesses and workers into hot water.

1. Having an Australian business number (ABN)

Myth:
If a worker has an ABN they are a contractor.

Fact:Just because a worker has an ABN does not mean they will be a contractor for every job. Whether the
worker has or quotes an ABN makes no difference and will not change the worker into a contractor.
To determine whether a worker is an employee or contractor, you need to look at the whole working
arrangement and examine the specific terms and conditions under which the work is performed. 

2.Common industry practice

Myth:“Everyone in my industry takes on workers as contractors, so my business should too.”

Fact: Just because “everyone” in an industry uses contractors does not mean they’re correct.
Don’t use “common industry practice” to make determinations.

3. Short-term work

Myth: Employees cannot be used for short jobs or to get extra work done during busy periods.

Fact: The length of a job (short or long duration) or regularity of work makes no difference to whether a
worker is an employee or contractor. Both employees and contractors can be used for:
• casual, temporary, on call and infrequent work
• busy periods
• short jobs, specific tasks and projects.

To determine whether a worker is an employee or contractor, you need to look at the whole working
arrangement and examine the specific terms and conditions under which the work is performed.


4. The 80% rule

Myth: A worker cannot work more than 80% of their time for one business if they want to be considered a contractor.

Fact: The 80% rule, or 80/20 rule as it is sometimes called, relates to personal services income (PSI) and how
a contractor:
• reports their income in their own tax return
• determines if they can claim some business-like deductions. It is not a factor a business should consider
when they determine whether a worker is an employee or contractor.


5. Past use of contractors

Myth: “My business has always used contractors, so we do not need to check whether new workers are
employees or contractors.”

Fact: Before engaging a new worker (and entering into any agreement or contract), a business should always
check whether the worker is an employee or contractor by examining the working arrangement. Unless a
working arrangement (including the specific terms and conditions under which the work is performed) are
identical to previous arrangements, it could change the outcome of whether the worker is an employee or contractor.

Sometimes a business may also have incorrectly determined their worker is a contractor. Continuing to rely
on the original “contractor” decision would mean the business is incorrectly treating all future workers as
contractors when they are employee.


6. Registered business name

Myth: If a worker has a registered business name, they are a contractor.

Fact: Having a registered business name makes no difference to whether a worker should be an employee or contractor for a particular job. Just because a worker has registered their business name does not mean they
will be a contractor for every job or working arrangement.

7. Contracting on different jobs

Myth: If a worker is a contractor for one job, they will be a contractor for all jobs.

Fact: If a worker is a contractor for one job, it does not guarantee they will be a contractor for every job.
The working arrangement and specific terms and conditions under which the work is performed will
determine whether a worker is an employee or contractor for each job.

Depending on the working arrangement, a worker could be an:
• employee for one job and a contractor for the next job
• employee and a contractor if completing two jobs at the same time for different businesses.

8. Paying super

Myth: “My business should only take on contractors so we do not have to worry about super.”

Fact: A business always needs to look at the working arrangement and examine the specific terms and
conditions under which the work is performed to determine whether a worker is an employee or contractor.
A business cannot decide to treat a worker as a contractor when they are an employee.
Additionally, businesses may be required to pay super for their contractors. If you pay an individual contractor under a contract that is wholly or principally for the labour of the person, you have to pay super contributions for them.

9. Specialist skills or qualifications

Myth: Workers used for their specialist skills or qualifications should be engaged as contractors.

Fact: If a business takes on a worker for their specialist skills or qualifications it does not automatically
mean they are a contractor. A worker with specialist skills or qualifications can either be an employee or c
ontractor depending on the terms and conditions under which the work is performed. Qualifications or the
level of skill a worker has (including whether they are “blue” or “white” collar) makes no difference to
whether a worker is an employee or contractor.


10. Worker wants to be a contractor

Myth: “My worker wants to be a contractor, so my business should take them on as a contractor.”

Fact: Just because a worker has a preference to work as a contractor does not mean your business should
engage them as such. Whether a worker is an employee or contractor is not a matter of choice, but depends entirely on the working arrangement and the specific terms and conditions under which the work is done.
If you give into pressure and agree to treat an employee as a contractor, you can face penalties, interest and charges for not meeting your tax and super obligations.

11. Using invoices

Myth: “If a worker submits an invoice for their work, they are a contractor.”

Fact: Submitting an invoice for work done or being “paid on invoice” does not automatically make a
worker a contractor. To determine whether a worker is an employee or contractor, you need to look at
the whole working arrangement and examine the specific terms and conditions under which the work is
performed. If based on the working arrangement a worker is an employee, submitting an invoice or being
paid on the basis of an invoice will not change the worker into a contractor.

12. Contracts

Myth: “If a worker’s contract has a section that says they are a contractor, then legally they are a contractor.”

Fact: If a worker is legally an employee, a contract saying the worker is a contractor will not make the
worker a contractor at law. Businesses and workers will sometimes include specific words in a written
contract to say that the working arrangement is contracting in the mistaken belief that this will make
the worker (who is an employee) a contractor at law. If a worker is legally an employee, a contract specifying
the worker is a contractor makes no difference and will not:
• override the employment relationship or change the worker into a contractor
• change the PAYG withholding and super obligations a business is required to meet.

The Australian Taxation Office website has more information and a handy decision tool that you can use to check if your workers are employees or contracts.


 

Tax Tips for Business Owners - February 2014












Tax Tips for Business Owners - February Edition

Hi Everyone,

Welcome to the February edition of Basman's Tax Tips for Business Owners.
To view the newsletter online please click here.

Different areas of the nation have already experienced bushfire, and summer hasn't finished with us yet. With natural disasters like fires and floods, the last thing anyone affected needs is problems with the Tax Office. There have therefore been put in place some protocols to help taxpayers through such difficult times.

With SMSFs continuing to gather strength, the weight of the sector's large investment holdings of certain asset classes is starting to be felt. Property continues to be the focus of a lot of SMSF trustees. We look at some salient tips - and point out some traps - about SMSF real estate investment.

Also covered in this month's newsletter is the tax implications of having a debt "forgiven", the concessionary treatment available to certain professionals, known as "income averaging", steps a partnership can take to smooth the transition, tax-wise, when a partnership business changes its makeup, and the common myths surrounding the contractor-vs-employee conundrum.

Should you require more information regarding any topic touched upon in this newsletter, please feel free to contact Alan on 0419 671 602 for personal advice.

Click here to view the newletter online.

Tax Tips November


Tax Tips for Business Owners - November Edition

Hi Everyone

Welcome to the November 2014 edition of Basman's Tax Tips for Business Owners.
To view the newsletter online please click here.

An allowance for necessary travel made by employees is written into the tax law, which we run an eye over in
this issue. But as there are two concessions for travel - the "living away from home" and the "travel" allowances - frequently both employers and employees confuse which is applicable. We spell out the differences.

If you are sick of your business's high electricity bills, and have thought of the option of solar panels, you may
also be able to take comfort from not only reduced energy bills but helpful tax outcomes for your operating
expenditure.

We also examine the web-based accommodation networking service Airbnb, which from a tax treatment point
of view is one out of the box as there is no specific legislation that exactly covers the Arbnb business model.

There is also a warning about a renewed Tax Office focus on income splitting within professional firms, and a
timely reminder about a looming deadline for an amnesty on disclosing certain assets.

Should you require more information regarding any topic touched upon in this newsletter, please feel free to
contact Alan on 0419 671 602 for personal advice.

Click here to view the newletter online.

Disclaimer: All information provided in this newsletter is of a general nature only and is not personal financial or investment advice. Also, changes in legislation may occur frequently. We recommend that our formal advice be obtained before acting on the basis of this information.

October Tax Tips


Tax Tips for Business Owners
October 2014

Welcome to the October 2014 edition of Basman's Tax Tips for Business Owners.
To view the newsletter online pleaseclick here
.
If you are about to set up a website for your business, or are making changes to an existing website, some of
the costs incurred from doing so may be available to either write off immediately or depreciate over a number
of years. How these expenses are treated for tax purposes depends on certain factors. We run over the ins and
outs of website expenditure claims to help you get your claim right.

The living away from home allowance can help many workers who are required to move away to secure employment.
We look at the details of this fringe benefit. Also the categorisation of profits as either revenue or capital using
trusts (and the subsequent tax treatment) is ruffling feathers again within property development circles. We look
at a Tax Office pronouncement on the issue, and what it means for your tax outcome.

We also flag changes to the eligibility criteria for the Seniors Health Card, finally have some firm dates for the
repeal of certain small business tax concessions (some have been backdated), and spell out some tips to ensure
prompt payment of your invoices.

Should you require more information regarding any topic touched upon in this newsletter, please feel free to
contact Alan on 0419 671 602 for personal advice.

Click hereto view the newletter online.

Disclaimer: All information provided in this newsletter is of a general nature only and is not personal financial or investment advice. Also, changes in legislation may occur frequently. We recommend that our formal advice be
obtained before acting on the basis of this information.

Tax Tips - September 2014



Welcome to the September 2014 edition of Basman's Tax Tips for Business Owners.
To view the newsletter online please click here.

Packaging a vehicle into a remuneration arrangement via a novated lease is a popular salary option - we run
over the details of how this is achieved and the outcomes for both employer and employee.

The tax concessions that have been made available to small businesses can be a valuable boost to the bottom
line for many players in the "engine room" of the economy. We look at what's available, but also underline the
more common mistakes that businesses make when claiming the CGT concessions.

We also see how the Small Taxation Claims Tribunal can help you with your more minor tax disputes, how to
turn tax into super by using salary sacrifice, and uncover the scenarios that could trigger some otherwise
unforeseen FBT liabilities.

Should you require more information regarding any topic touched upon in this newsletter, please feel free to
contact Alan on 0419 671 602 for personal advice.

Click here to view the newletter online.

Disclaimer: All information provided in this newsletter is of a general nature only and is not personal financial
or investment advice. Also, changes in legislation may occur frequently. We recommend that our formal advice
be obtained before acting on the basis of this information.

Tax Tips for Business Owners - August 2014












Hi Everyone

Welcome to the April 2014 edition of Basman's Tax Tips for Business Owners.
To view the newsletter online please click here.

A vindication for your making the sensible decision to seek out professional advice can be to find that the costs
of doing so are deemed tax deductible.

While the deduction rules for professional consultation on tax affairs are typically straightforward, when it comes
to investment advice there are certain differences in regulations you should be aware of.

We have also uncovered a possible tax deduction where tax advice is provided by a financial planner. This is due
to a recent law change to the Tax Agents Services Regime.

We look at what the Tax Office says are common tax deduction errors made by rookie property investors, spell
out the Tax Office’s powers under the law when it comes to accessing to your information, and run through the
areas coming under its scrutiny for SMSF compliance issues in the year ahead.

On a positive note, the Tax Office is also seeking input from savvy small business owners to help it build its small business expertise. You can apply to join its consultation panel and even be paid for your efforts if successful.

Should you require more information regarding any topic touched upon in this newsletter, please feel free to
contact our office for personal advice.

Click here to view the newletter online.

Disclaimer: All information provided in this newsletter is of a general nature only and is not personal financial or investment advice. Also, changes
in legislation may occur frequently. We recommend that our formal advice be obtained before acting on the basis of this information.

Tax Tips for Business Owners - July 2014













Tax Tips for Business Owners
July 2014


Welcome to the July 2014 edition of Basman's Tax Tips for Business Owners.
To view the newsletter online please click here.

Many of you will have at least heard of Bitcoin, and some may have even used the new digital currency.
Bitcoin looks set to revolutionise monetary transactions, and perhaps sooner than many imagine. The virtual
currency even has the attention of the Tax Office. We examine the ramifications, and the pros and cons, of
Bitcoin prior to the release of official guidance from the Tax Office, which is due out soon.

It's an unfortunate but likely reality that many of us will have some sort of dealings with a deceased estate.
Having an idea of what to expect from a tax perspective can go a long way to easing this heavy burden and
ensuring your loved one passes on their assets in accordance with their wishes in a fair and equitable manner.

Other highlights in this edition are a look at the "taxable payments annual report" for businesses in the building
sector, which is due this month, and the winding back of the net medical expenses tax offset. Finally we include
a reminder to SMSF trustees about the new penalty regime that is now in force.

Should you require more information regarding any topic touched upon in this newsletter, please feel free to
contact Alan on 0419 671602 for personal advice.

Click here to view the newletter online.

All information provided in this newsletter is of a general nature only and is not personal financial or investment advice. Also, changes in legislation may occur frequently. We recommend that our formal advice be obtained before acting on the basis of this information.

Super Guarantee increase from 1 July 2014










Change to Employee Super Rate from 1 July 2014

From 1 July 2014, you must pay a minimum of 9.5% of each eligible employee's ordinary time earnings in super.

You have to pay super guarantee contributions for each eligible employee by the quarterly cut-off dates:

 Quarter
 Period
 Payment cut-off Date
1
1 July - 30 September
28 October
2
1 October - 31 December
28 January
3
1 January - 31 March
28 April
4
1 April - 30 June
28 July

Contact Alan Beck at BASMAN RETURNS  on 0419 671 602 for all your business accounting & taxation needs.

Tax Tips May 2014











Hi Everyone

Welcome to the May 2014 edition of Basman's Tax Tips for Business Owners.
To view the newsletter online please click here

Recent changes have been made to some social service, family benefit and other entitlements, which we run
through and explain. There are also changes looming for superannuation contribution caps (the good news here is
that they are increasing).

And did you know that the basis to determine the costs of aged care accommodation is being given a shake-up?
Read our summary of the impending transition from income tested cost determination to one that includes
asset holdings, and what this change entails going forward.

We also touch upon the tax implications of marriage (including the implications of the main residence exemption
for CGT and treatment of interest income from joint bank accounts). And if you are considering winding up your
SMSF, we also spell out the steps necessary to make that happen.

Should you require more information regarding any topic touched upon in this newsletter, please feel free to
contact Alan on 0419 671602 for personal advice.

Click here to view the newletter online.

Disclaimer: All information provided in this newsletter is of a general nature only and is not personal financial or investment advice. Also, changes in legislation may occur frequently. We recommend that our formal advice be
obtained before acting on the basis of this information.

Tax Tips April 2014



Tax Tips for Business Owners
April 2014

Hi Everyone

Welcome to the April 2014 edition of Basman's Tax Tips for Business Owners.
To view the newsletter online please click here

While most people know that the fees for preparing and lodging tax returns are deductible, far fewer are
aware that the specific regulations operating in this area of tax law also allow for extra deductions to be claimed
in certain circumstances.

While the repeal of the mining tax (the Minerals Resource Rent Tax) is yet to pass the Senate, there are some
perhaps surprising negative implications for small businesses regarding asset write-offs and depreciation.
We run over the details.

We also warn of the fast-approaching deadline to apply for the R&D Tax Incentive, provide an overview of what
it takes to set up your own SMSF, and look at the different investment asset classes and the tax implications
of each.

Should you require more information regarding any topic touched upon in this newsletter, please feel free to
contact Alan on 0419 671 602 for personal advice.

Click here to view the newletter online.

Disclaimer: All information provided in this newsletter is of a general nature only and is not personal financial or investment advice. Also, changes in legislation may occur frequently. We recommend that our formal advice be obtained before acting on the basis of this information.

Do I need a Business Bank Account?











If you’re operating as a sole trader or partnership you don’t have to open a business bank account, but………
it’s a much better idea to have one.

Read on for the details!

Benefits of a business bank account
While there is no legal requirement for sole traders and partnerships to have a business account, it’s still a
good idea to open one.

With a business account, you’ll find it easier to:

  • do your bookkeeping with less stress, less time and less cost
  • track and control your business expenses and income so you can manage your business
  • extract the information you need to give to your accountant to do your tax return

It also helps to present your business in a more professional manner when dealing with your customers.

BASMAN RETURNS recommends separate business bank accounts

If you operate a business (using an ABN), we recommend you open a separate business bank account for your
business income and expenses. This means you can easily keep your business transactions separate from your
personal finances.

If you operate your business as a company or trust, you must have a separate bank account for your business.

If you have a business bank account, BASMAN RETURNS recommends that you avoid paying personal expenses
from it. This will make your business accounting clearer, simpler, faster and cheaper.

Find out more Contact Alan Beck at BASMAN RETURNS- Chartered Accountants if you need any assistance with
accounting and taxation requirements for your business.

Do I Need to register for GST?











What is GST?

GST is a tax on most goods and services sold or consumed in Australia. Goods and services tax, often known as GST,
is collected by registered businesses.
If your business is registered for GST, you will have to collect some extra money (one-eleventh of the sale price) from
your customers and pay it to the Australian Taxation Office (ATO) when it is due.

Do I need to register?
You must register for GST if your business has a gross income (also known as ‘GST turnover’) of $75 000 per year or
more GST turnover is your business’ gross income, not your business’ profit.
For example, if you run an online clothing store and you sell $80 000 worth of clothes, you’d have to register for GST because your GST turnover is over the $75 000 threshold. This rule still applies, even if you only get to keep $40 000.

When do I need to register?
If you haven’t registered for GST, and you become aware that your GST turnover will exceed the $75 000 per year threshold, you will have to register for GST within 21 days.
It’s a good idea to check each month to ensure you’re not likely to go over the over the limit. Keeping an eye on your
GST turnover is important so you can register if necessary.

How do I register?
You’ll need an ABN to register for GST. Your ABN will also become your GST registration number.
If you anticipate that your GST turnover will be over $75 000, you can register for GST and apply for your ABN at
the same time.If you already have an ABN, but haven’t registered for GST, find out how to register for GST on
the ATO website.

What are GST credits?
GST credits are a potential amount of money your business might be able to claim from the ATO.
If you are registered for GST, you can ‘claim back’ the GST that has been included in the purchase price of something you’ve bought for your business.
For example, Laura runs an consultancy firm and has just bought a new computer for the office. The computer cost
Laura $1100, including GST. Because GST is one-eleventh of the sale price, Laura would have paid $100 in GST.
Laura is registered for GST because her business’ GST turnover is more than $75 000. She is able to claim GST
credits for the GST included in the sale price of her computer ($100).If her GST credits are higher than the amount
of GST she has to pay the ATO, she will be able to get a refund.

What happens if I don’t register for GST?
If your GST turnover is under $75 000 and you don’t register for GST, you won’t include GST in your fees. You also
can’t claim GST credits for your business purchases.

Want more information?
Contact Alan Beck at BASMAN RETURNS- Chartered Accountants if you need any assistance with accounting and taxation requirements for your business.

Getting ahead with good accounting records

Research shows businesses that are good at meeting their GST and activity statement obligations tend to run more successful businesses. This can be because the business systems and processes they use to manage their tax affairs help them keep track of their business performance and make sound business decisions.

By maintaining proper records of dates, fees for service, expenses, wages and other costs, you can use this information to help you:

  • manage your cash flow
  • complete your activity statements more easily
  • avoid reporting errors, such as not reporting the correct amount of GST
  • keep track of creditors and debtors
  • demonstrate your financial position to banks.

If you run a small business and would like to find out what records your business should be keeping or help evaluating how well your business is keeping records contact Alan at BASMAN RETURNS on 0419 671 602 or email alan@basman.com.au



Tax Tip # 3


Small businesses can claim an immediate tax deduction for assets costing less than $6,500. So if you need office equipment or other assets and you have a small business entity, purchase these items before 30 June to get the deduction this year.

As always, don't spend your hard-earned money on things you don't need just to get a tax deduction. Its not worth spending a dollar to save 30 cents.


Gold Coast Accountant

Changes to the super guarantee rate

To help grow Australian workers' savings for retirement, the compulsory super guarantee rate will gradually increase from 9% to 12%. When you make super payments on behalf of your employees based on the minimum 9% super guarantee rate, you will need to increase this rate on which you base your calculations to 9.25% on 1 July 2013.

The Super Guarantee rate will increase gradually from 9% to 12% from 1 July 2013 as follows: 

                        2013/14             9.25%
                        2014/15             9.5%
                        2015/16           10%
                        2016/17           10.5%
                        2017/18           11%
                        2018/19           11.5%
                        2019/20           12%

What you need to do

  • Update your payroll and accounting systems to apply the appropriate increase to the super guarantee rate.
  • From 1 July 2013, increase the rate you use to work out the super guarantee payments you make for your employees from 9% to 9.25%.
  • Continue to increase the rate you use to work out the super guarantee payments you make for your employees each year until 1 July 2019.

If you require any assistance contact BASMAN RETURNS for Superhero Service for your business.


Gold Coast Accountant




Employee or Contractor ?

The Tax Office's new Employee or contractor homepage has information you need to work out whether your workers are employees or contractors including:

Grow your Gold Coast business
  • the basics - things your business needs to know

  • the common reasons businesses get the decision wrong

  • industry specific information

  • an Employee/contractor decision tool

  • summary of the obligations you need to meet for your employees or contractors.

If you get the decision wrong, you risk having to pay penalties.

For more information, visit Employee or contractor or contact Alan at BASMAN RETURNS

FREE Webinars for Business Owners

The Queensland Government is running a series of 1 hour webinars (web-based seminars) in 2012 to help small business owners improve their skills and their business.

The free webinars cover a variety of topics, including:
  • cloud computing
  • using Facebook, Twitter & LinkedIn for business success
  • local search marketing and search engine optimisation
  • pay per click online advertising.

All webinars are interactive and allow you to give, receive and discuss the topic in more depth.
To find out more, including how to register, visit the QLD Business and Industry  website

Cheers

National Business Name System

The current state based business names system is to be replaced by a National system after 28 May 2012

The registration process will be online and will be linked to the ABN application process.

Costs will be around $30 for one year and $70 for three years - A cost reduction in most states and territories.

Existing businesses do not need to do anything, their existing business
names will transfer automatically to the national register.

If you have an queries contact the BASMAN on 0419 671 602 or by email at alan@basman.com.au

Cheers & Best wishes for a safe and happy Christmas & New Year

Alan