On 9/21/06, Rev Simon Rumble <[EMAIL PROTECTED]> wrote:
Hi folks.
I'm about to start contracting and it seems it's a lot more efficient to
have things wrapped into a company. I've been looking around and seeing
stuff about the "80/20 rule" and the like, which determines whether you
can apply company tax instead of personal income tax, and other stuff.
So does anyone out there have any (IANAA) advice on such things? Any
recommendations of accountants to get advice from? Ideally accountants
who can deal with free-software ledger systems...
IANAA, but I've been there.
Maintaining a pty ltd {I.E. acn} company is expensive. You're up for a
minimum of around $2000 a year in accountant fees, fees maintain the
company name, annual returns etc. You don't HAVE to do it this way -
but a lot fo contracting agencies still insist on it. You can go down
the ARBN route - I have no idea what that costs. You can check out the
hoops you need to jump through here
http://www.asic.gov.au/asic/asic_infoco.nsf/byheadline/Starting+a+company+or+business?openDocument
You've also got to consider that you have to run your own
superannuation if you decide to go down the company route - and you do
NOT want to fall behind or neglect it - APRA/Tax are ruthless about
chasing super input - more so than chasing tax. Of course, this means
another lot of accountant fees, as the super fund has to be audited
every year and have its own tax return. This is on top of the company
tax - from memory, I was paying about $2000 a year for the company tax
matters, and probably $2500 a year for the super fund tax matters, as
they were more complex.
The rules for contracting have moved on from the old days of the 80/20
rule, especially with the current government focus on
outsourcing/contracting, but the basic rule of thumb is - if you're
expecting a contract to last more than 12 months, you could be in
trouble with the tax office.
Note that I said COULD - it usually comes down to individual
determinations. If the company who is employing you can provide proof
you are a genuine contractor, not a backdoor employee, then the tax
office will overlook it - but it can be a nasty route to prove.
The best advice I can give is find a damn good accountant - because
you're going to need one. The rules are horrendous, and change each
and every single year.
There are advantages - you can buy a lot of "business related" stuff
and pay for it pre-tax - saving you loads in tax - but you have to be
careful that the stuff is related to the industry you're in, or
genuinely necessary for your business. Again - talk to an accountant
about stuff you can do - for example, if you work from home, determine
a percentage of your rent/mortgage that is used by your business
{space, time, electricity etc} and pay for that from the business,
pre-tax.
Did I mention you should talk to an accountant? :-)
OK, enough off-topic wafle. Talk to an accountant, OK?
DaZZa
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