Generally there isn't an advantage to claiming tools & insurance through a company structure.
As an employee your employer pays for your insurance anyway. Insurance is, in one respect, an additional cost that you must cover if you have a company - this is why the change out rate is higher to cover these kinds of costs. Tools are, generally, a tax deduction anyway when you are an employee. Being an employee gives you annual leave, sick leave and all sorts of rights. You need to avoid PSI to get an advantage from a company structure. From: [email protected] [mailto:[email protected]] On Behalf Of Preet Sangha Sent: Friday, 30 April 2010 12:50 To: ozDotNet Subject: Re: Contracting to a single company Can I make the following observation. I'm from the UK and we had similar legislation (IR39). From what you say personal tool and insurances are covered as legit expenses. Doesn't that cover most thing that you'd claim for anyway. Yes I understand that you cannot distribute profits other than as taxable to you, but surely tools and insurance gives a significant advantage over 'salary'. Obviously you'd need an accountant, but I suspect that the company can provide heath and 'key man' type insurances, as well as computers/software as it sees fit. In my particular case I was able to justify relatively high hardware and software costs by demonstrating that I worked at the cutting edge and needed bleeding edge tools to make the business sustainable. In this case many of the 'tools' that I bought were those that were used in one contract only and then 'upgraded' to the later ones for later contracts. On 30 April 2010 14:37, James Chapman-Smith <[email protected]> wrote: Hi Trevor, I'm not sure I understand what you mean by "plan how you distribute the income that PSI entity receives"? The entity doesn't get the PSI, you do. You don't have a choice but to "distribute" it to yourself. Apart from the legitimate expenses that the company has it is as if you earnt the money as an employee. I also understand that a "one man band" also means that many of the otherwise legitimate company expenses are also no longer so. You almost only can claim personal tools, and work cover and professional insurances. That kind of thing only. Cheers. James. From: [email protected] [mailto:[email protected]] On Behalf Of Trevor Andrew Sent: Friday, 30 April 2010 11:58 To: 'ozDotNet' Subject: RE: Contracting to a single company Hi James, But if you are a "one-man company", and you do only have a single client and hence a single source of income, you can simply accept that you are a PSI entity. The only ramification to satisfy the ATO is that you pay the vast majority of your company's income as a single salary (to you) minus the legitimate costs of "running your company". About the only advantages this confers is that some costs you may have chosen to pay for out of your personal post-tax money, you can now pay for (partially / fully) from your company's funds. But not many. You definitely need the assistance of an accountant to ensure you do this appropriately. So as I understand it, it is still very feasible. You simply have to accept that you are earning your income as a PSI entity, declare that to the ATO, and plan how you distribute the income that PSI entity receives carefully. Cheers, Trevor From: [email protected] [mailto:[email protected]] On Behalf Of James Chapman-Smith Sent: Friday, 30 April 2010 11:21 AM To: 'ozDotNet' Subject: RE: Contracting to a single company Hi folks, You simply can't get away with PSI without serious implications from the ATO. You must earn at least 20% of your income from an independent source - ie no more than 80% from one company (or related company). You can NOT pay your spouse to do "secondary" tasks relating to your business to avoid PSI. Secondary tasks include accounting, marketing, etc. Primary activities would be like programming, installations, etc. So, "doing the books" does not count no matter if you have timesheets or not. The two biggest ways to avoid PSI is by having legitimate employees or by taking on projects that get you paid on completion not by the hour. You may have a single company as a client provided you don't charge by the hour and you must have a contract that clearly stipulates the deliverables required to get paid. Folks, the ATO has this sewn up and they are TARGETING IT professionals. Sorry for the bad news. Cheers. James. From: [email protected] [mailto:[email protected]] On Behalf Of Stephen Price Sent: Friday, 30 April 2010 00:17 To: ozDotNet Subject: Re: Contracting to a single company My wife is doing my books. You should hear her complain about it. And I have to really pay her to do it. The ATO understand. On Thu, Apr 29, 2010 at 3:12 PM, David Burstin <[email protected]> wrote: On Thu, Apr 29, 2010 at 5:03 PM, Trevor Andrew <[email protected]> wrote: What they don't want to see is your company earns X, and you pay a salary of X/2 to you and X/2 to your wife for "doing the books". Unless your wife really is doing the books, has timesheets to prove it, and is just paid for her actual time at a commercial rate. Cheers Dave Cheers, Trevor From: [email protected] [mailto:[email protected]] On Behalf Of Michael Ridland Sent: Thursday, 29 April 2010 4:37 PM To: ozDotNet Subject: Contracting to a single company Hi I've heard from some people that there is tax implications of contracting to a single company for more than 75 percent of your income, is there any truth to this? Thanks, -- regards, Preet, Overlooking the Ocean, Auckland
