Business Guidelines
Guidelines for contractors running their own business
Introduction
The implementation of Tax Reform including the Goods &
Services Tax from 1 July 2000 has significantly impacted upon the
way many Contracting professionals operate.
This section has been developed to assist you with some very
basic aspects on your obligations as a Contractor. It is not
intended to be prescriptive or in-depth advice. It is highly
recommended that you consult your Tax Agent, Accountant or financial
adviser, as appropriate.
Goods and Services Tax
The following are answers on frequently asked questions in
relation to the Goods and Services Tax. You should consult their tax
agent, call the tax office's GST hotline on 132 478, or visit the
tax office's website if you require further information or
clarification.
Q: What is GST and how will it impact contracting?
A: GST is a 10% tax on the supply of goods and services.
Since 1 July 2000, Infopeople services are subject to GST and
we will charge 10% GST on our invoices to our clients.
Q: How will GST change the terminology for contractors?
A: Since 1 July 2000, there will be two types of
contractors: individuals; and enterprises (companies, partnerships
or trusts)
Q: Do contractors need to register for GST?
A: If you perform contract work as an individual through
Infopeople, you do not need to register for GST. If you operate
as an enterprise (as a company, partnership, or trust), you will
need to obtain an Australian Business Number (ABN). If your annual
turnover is over $50,000, you will also need to register for GST
and charge GST on your services.
Q: Does GST change how contractor rates are quoted?
A: No. Contractors and clients will be quoted prices
exclusive of GST. For clients, the price will be quoted as $x per
hour, plus GST. For contractors, prices will be quoted as $y per
hour. If you are operating as an enterprise and have registered
for GST, the rate we pay you will be $y plus 10% GST. If you are
an individual, you will be paid $y per hour.
Q: What information will Infopeople require from
contractors?
A: The only additional information required will be the
collection of the ABN, and a signed Infopeople ABN / GST
Declaration — this has been sent to all our current contractors.
Q: What does PAYG mean?
A: PAYG — Pay As You Go is the new tax that replaces
PAYE (Pay As You Earn), PPS and eleven other taxes. For
contractors operating as individuals, it will mean no change
(except for reduced rates in the tax bandings).
Q: What happens to PPS and 221D?
A: PPS will disappear as an option for contractors. 221D
notifications expire on 30 June 2000. Contractors who have a 221D
notification need to re-apply.
Q: What happens to sole traders?
A: Under the new GST regime, sole traders will be
treated as individuals. They may have an ABN for business that
they do on their own account, however, when dealing with
Infopeople they will be treated as individuals and will fall into the
PAYG regime.
Q: Where do contractors go for more help?
A: You should talk to your tax agent, call the tax
office's GST hotline on 132 478, or visit the tax office's
website.
Record Keeping
The Income Tax Act requires that you keep sufficient records to
enable you to determine your gross income, support any income tax
deductions that are claimed and, where relevant, to support the
amounts returned on your GST return supported by suppliers invoices,
timesheets etc.
Depending upon the scale of your activities your best option
might be:
- a manual cashbook and diary
- a computerised cash book and diary, e.g. Quicken or Microsoft
Money
- a fully functional accounting package, e.g. MYOB or Profax
Regardless of the option chosen, it should be maintained
regularly and at least weekly. Otherwise, records and details of
expenses may be overlooked or income may not be returned. The former
leads to paying more tax than is necessary. The latter may lead to
substantial tax penalties. Contact your tax advisor if you are
uncertain what is best for you.
Direct Expenses
Direct costs, such as stationery, attributable to earned income
from self-employment (including contracting) are tax deductible. In
addition professional fees, continuing education and training costs
and business related publication costs are usually deductible.
Transport Costs
Travel from your place of business to the place where the work is
performed is deductible. Where you operate in your own name you are
required to keep a log book of vehicle usage.
Home Office Expenses
You may be able to claim the costs attributable to the use of
your home for business. This is based on the proportion of the floor
area that is used for business. Rent, depreciation, rates, mortgage
interest, repairs and maintenance, rates, energy costs and insurance
may be included.
Communication Costs
Typically, 50% of the line rental of your home phone and all
business related call costs are deductible. Where you use a mobile
phone primarily for business, its costs, except for private call
costs, are deductible.
Disclaimer: This
information is of a general nature and is not to be construed as
financial advise. All facts contained therein represent the
understanding of these matters by Infopeople as at the publishing
date of this web site.
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