Resources, Hints and Tips

Should I be an employee or subcontractor? Should I have ABN or TFN? These days it is very common for freelance consultants or tradies and sole traders to provide services to companies on ad-hoc or casual basis. This relationship does create confusion for employers and service providers who are either employees or subcontractors.   It’s important you get this right because it affects your tax, super and other obligations. If you wrongly treat your employees as contractors you risk having to pay penalties and charges.   The rules are simple and easy to understand and you can also click on ATO’s website to go through detailed test.   https://www.ato.gov.au/Calculators-and-tools/Host/?anchor=ECDTSGET&anchor=ECDTSGET/questions/ECDT#ECDTSGET/questions/ECDT

Individual taxpayers with business income from an unincorporated business that has an aggregated annual turnover of less than $2 million will be eligible for a small business tax discount. The discount will be five percent of the income tax payable on the business income received from an unincorporated small business entity. The discount will be capped at $1,000 per individual for each income year, and delivered as a tax offset. The start date for this measure is the 2015–16 income year.

Tax benefits that can save you money Salary sacrifice pays! Many people reduce their income tax bill now and improve their future retirement by making extra before tax contributions to super. Try it in the tax calculator to see what you could save. Then ask your employer about salary sacrifice. When you retire, your superannuation is likely to be an important, and possibly your main source of income. That’s why it’s a good idea to top it up while you’re still working. But did you know, there are also some excellent tax benefits you can take advantage of right now – just by making your own voluntary superannuation contributions? There are two main ways to add to your super:

1. Before-tax contributions through an agreement with your employer. This is called salary sacrificing
2. After-tax contributions from your take-home pay

Do I pay tax on super? In most cases, yes – but usually at a lower rate than your regular income tax. Super can be taxed at three possible stages:

1. When your employer makes a super contribution, and you when you make a before-tax contribution – 15% tax
2. As your super investments grow (tax on earnings only) – 15% tax
3. If you withdraw from your super funds before you turn 60 years of age – but remember once you turn 60 your pension payments are tax free.

The good news is, the superannuation tax rates are often a lot less than regular tax on income and normal investment earnings. These are called superannuation tax concessions.