Home – New Forums Starting your journey HELP! ABN, individual tax and tax returns!

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  • #982450
    ace
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    Hi everyone, My name is Ace, my question is related to sub-contractor.

    I work in a family-owned restaurant, my boss made me to have a ABN number, in that case, she doesn’t need to pay me tax(yes, she didn’t). and I heard that the subcontractor has to pay their own tax by the end of the finical year, that makes me worry a lot.

    How much tax do I actually need to pay over my income?
    How do I do the tax returns?

    I am not earning a lot of money, since I knew I have to pay my own tax, I always worried about that I have to pay loads and loads and loads tax at the end of year.

    Anyone could give me some advice?

    How to balance out the income and the tax?

    Last question: Since I have a ABN as a sub-contractor, can I use the same ABN to work as a sole trader?

    Thanks for reading.

    kind regards,

    Ace.

    #1136916
    al.giffard
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    • Total posts: 97
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    Hi there Ace,

    Firstly, you’re not alone in worrying about how much your tax will be as a subcontractor.

    One way to figure out how much you’ll have to pay in tax is to estimate how much you will be paid for the full income year, 1 July 2012 to 30 June 2013. Then, apply that amount to the 2012-13 individual income tax rates to estimate your income tax for the year. The tax rates are available here: http://www.ato.gov.au/individuals/content.aspx?doc=/content/12333.htm

    You should also budget for the Medicare Levy of 1.5% on top of your tax. There are a few other things that might impact the amount you have to pay, including the Medicare Levy Surcharge, HELP debt repayments and tax offsets. So keep in mind that the above is just an estimate.

    I hope that helps put your mind at ease, being able to estimate what you will have to pay.

    Given your circumstances are a bit different to a usual salary/wage earner, I would suggest seeing an accountant to help you out – particularly to actually lodge your tax return. This will ensure your return is prepared correctly and that you claim everything you’re entitled to. But in addition, a Registered Tax Agent usually gets additional time to lodge your return. This means that, if you have a large bill to pay but don’t have the money to pay, instead of paying your tax by November, you could pay as late as the following May.

    Finally, yes, you can use your subcontractor ABN to do business as a sole trader. That ABN is yours and should be used for any business you carry on.

    Hope that helps!

    Alan.

    PS: the above is just general information and shouldn’t be relied on as professional advice.

    #1136917
    Healthy Personal Finances
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    Hi,
    I am not sure why they made you get an ABN to pay you that way.
    But regardless, don’t stress – it is just a bit more work for you to plan and pay your tax (as normally the employer does most of this hard work for you !).
    Like above, work out your annual income and use the ATO rates to work out a general tax amount payable.
    keeping in mind, that calculation won’t include any work related expenses or deductions, or any other income from interest or dividends, etc.
    But it is a good place to start.
    You can do the tax return yourself and lodge via the ATO website, but if this is your first time doing so, I would recommend finding a local accountant to help get the best result for you.
    If your employer is not paying tax for you, keep in mind they are probably also not paying superannuation for you either. Although it might not seem important now, but superannuation is going to be your retirement income, so you should start thinking about that soon as the sooner you start putting money into a super fund, the sooner the balance can grow for you.
    If you have any specific questions, feel free to contact us.
    Cheers
    Stacey

    #1136918
    al.giffard
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    I agree with Stacey that super is something that’s important to think about as a subcontractor.

    One thing to consider is whether your ’employer’ has an obligation to pay you super. Some businesses assume there is no obligation to pay super for any subcontractors, but that’s not the case. Many subcontractors are entitled to super. In my experience, it’s not uncommon for businesses to get this wrong, so it’s definitely something to check in your particular situation.

    The ATO provide advice on this here: http://www.ato.gov.au/businesses/content.aspx?doc=/content/19159.htm

    Specifically, the ATO note: “If you pay your contractors under a contract that is wholly or principally for labour, you have to pay super contributions for them.”

    Cheers,

    Alan.

    #1136919
    James Millar
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    Here is how the ATO would see it on a technical basis based on what you have described.

    1. You are probably a common law employee per the relevant tests and not a contractor (income from personal effort, control, integration etc). If it looks like a duck and quacks like a duck then it is a duck – even if branded otherwise. Accordingly your employer would be held responsible for the various taxes and reporting associated with employment – including super. And yes they can be held responsible retrospectively (and personally) for failure to withhold PAYG and attend to other employer obligations.

    2. You are probably not entitled to an ABN because you are not actually conducting an enterprise (in providing employee like services).

    3. Even if you were a contractor per the super law there is a good chance the business would be required to pay super for you. There are many cases in fairwork at the moment contending with this very issue (unpaid super entitlements for contractors – specifically disgruntled former contractors).

    Businesses like this are asking for trouble. Fortunately all you need to do for the moment is report the income in your personal tax return after the end of the financial year and pay the tax once assessed by the ATO.

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
    #1136920
    Divert To Mobile
    Member
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    Healthy Personal Finances, post: 156078 wrote:
    Hi,
    I am not sure why they made you get an ABN to pay you that way.

    They do it because they think

    1. They dont have to pay super
    2. dont have to pay withholding tax
    3. Dont have to be concerned with fair work

    Sure thats wrong but they dont know that.

    Steve

    #1136921
    TehCamel
    Member
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    ace, post: 156064 wrote:
    Hi everyone, My name is Ace, my question is related to sub-contractor.

    I work in a family-owned restaurant, my boss made me to have a ABN number, in that case, she doesn’t need to pay me tax(yes, she didn’t). and I heard that the subcontractor has to pay their own tax by the end of the finical year, that makes me worry a lot.

    How much tax do I actually need to pay over my income?
    How do I do the tax returns?

    I am not earning a lot of money, since I knew I have to pay my own tax, I always worried about that I have to pay loads and loads and loads tax at the end of year.

    Anyone could give me some advice?

    How to balance out the income and the tax?

    Last question: Since I have a ABN as a sub-contractor, can I use the same ABN to work as a sole trader?

    Thanks for reading.

    kind regards,

    Ace.

    asctually, this is pretty much against the law for her to do..
    search ATO for “am i a contractor or employee”
    basically, it’s her way of avoiding a number of requirements that she would otherwise have to pay you.

    #1136922
    Healthy Personal Finances
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    • Total posts: 194
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    Divert To Mobile, post: 156150 wrote:
    They do it because they think

    1. They dont have to pay super
    2. dont have to pay withholding tax
    3. Dont have to be concerned with fair work

    Sure thats wrong but they dont know that.

    Steve

    That was exactly my point Steve. Employers can’t force you to get an ABN. I realise they do it to try and avoid certain costs. That was the point I was trying to make. Just because someone says something, it doesn’t mean we do it.
    Point is – it has been done, so I was trying to make some other points to consider.

    Thanks
    Stacey

    #1136923
    kathiemt
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    Ace, did this ever get sorted out?

    There is a tool on the ATO site that will give both you and your employer some idea. Basically I feel you are an employee and your boss should be paying all the entitlements that you’re eligible for.

    See the decision tool at http://www.ato.gov.au/Calculators-and-tools/Employee-or-contractor/

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