Home – New Forums Money matters Need help for tax issue for sole trader~~!

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  • #973258
    tndfloor
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    Hi, my name is heather. i am new to flyingsole and desperate for your help!

    Ok,
    My hubby is running general trading on his own, been running it for only 10months. i am fulltime house wife looking after 1 year old daughter, casually help him when requried for matter of phone calls and issuing invoice and etc…..

    For the business,
    This year, as first year of business we have made about 46,000 and we spend 20,000 for purchase(business expenses such as working materials and machines) and we have received 10,000 from our parents overseas.
    Business requires lots of expense, about 10-20% of income is used for purcahsing materials.

    Because tax return period is coming, this is really big problem for us.
    We have spoke to an accountant and he told us to change our business to PYT LTD, says advantages of 30% flat rate tax, deductions, etc….insurances, super annuation and saying that we can lodge partnership, shareholders..etc. everything was bit too much to take…:(

    Honestly,…I did not get enough info for paying 190$..
    And the service fee charges to us was bit much for us, and the most of all…
    He did not seem so reliable for us, so here i am looking for experienced sole trader who had gone thru this process or tax problem expert. :)

    Because, we are now a bit low in cash,
    minimising tax is really necessary!..and looking up if lodging tax as sole trader would be bette option at this time.
    I heard that if we lodge tax return as sole trader, we cannot deduct expenses. some say we can, so it’s really confusing.

    Anyone of you can give me an advice, that would really help us a lot.

    Thanks!!!!

    #1060645
    @HeatherSmithAU
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    Heather,

    I suggest you contact the ATO.

    They will send an advisor out, oncve a year for about an hour to answer lots of questions.

    I suggest you visit the ATO website, and identify when they are offering free seminars in your area. They will offer basic bookkeeping, basic tax, basic BAS preparation courses.

    The fee the accountant charged you $190 was extremely cheap for an accountant.

    Where are you located?

    #1060646
    tndfloor
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    MYOB, post: 74981 wrote:
    Heather,

    I suggest you contact the ATO.

    They will send an advisor out, oncve a year for about an hour to answer lots of questions.

    I suggest you visit the ATO website, and identify when they are offering free seminars in your area. They will offer basic bookkeeping, basic tax, basic BAS preparation courses.

    The fee the accountant charged you $190 was extremely cheap for an accountant.

    Where are you located?

    Thank you for the tips!
    Yes, i think i wil contact ATO,

    #1060647
    StellarScott
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    I think you need to find an accountant who will work through the issues with you
    Someone who will listen and talk at your level
    The ATO will not give advice on the best structure for your business. They will only focus on help in meeting your tax obligations
    Find an accounntant in your area with experience with small business and is interested in helping you grow and achieve.
    Theres a few on here if you tell us where you are

    #1060648
    bluepenguin
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    In my experience I’ve found that many accountants will be very keen to get you set up as a company primarily because they will make a lot more money out of you that way.

    They may make $1000 or more when you set up the structure, and then your tax returns will cost much more every year from then on. So even if you end up paying a little less tax, it will be very likely that you’ll be paying more overall at tax time.

    I have been operating as a sole trader for 5 years, and I’m far better off this way – I can still claim all of my expenses and split my income with my wife. I can pay super and insurance just like a company can.

    In my (and my acountant’s) opinion, if you’re just a small, home based business, the only real benefit in setting up as a company is to protect your assets. In my case, there is no need for this as all I have is a smashed Daewoo and 2 dogs.

    You really need to find a good accountant who will sit down with you and explain everything to you. Don’t be afraid to shop around.

    I’ve often felt like the accountants I’ve dealt with have just figured like many small businesses, I’ll soon go bust, so they may as well milk me for all I have before then.

    Good luck.

    MYOB, post: 74981 wrote:
    The fee the accountant charged you $190 was extremely cheap for an accountant.

    Not if the OP still has all these questions it wasn’t.

    #1060649
    tndfloor
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    StellarScott, post: 75105 wrote:
    I think you need to find an accountant who will work through the issues with you
    Someone who will listen and talk at your level
    The ATO will not give advice on the best structure for your business. They will only focus on help in meeting your tax obligations
    Find an accounntant in your area with experience with small business and is interested in helping you grow and achieve.
    Theres a few on here if you tell us where you are

    Thanks for the reply StellarScott
    I have already spoke to an accountant and still don’t get the point.
    I may be over reacting but during the consultation with accountacnt, i felt that he’s really pushing me to form a business.
    I didn’t want to do it without knowing what’s what.

    But, yes,..
    I am on the same side as you are about the ATO.
    In the end, they will trying to fit me into the tax outline.

    I was given advice that i can consider setting up partnership, i didn’t look into it thoroughly, but it seems really good deal for us.

    Thanks for reply.

    #1060650
    tndfloor
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    bluepenguin, post: 75131 wrote:
    In my experience I’ve found that many accountants will be very keen to get you set up as a company primarily because they will make a lot more money out of you that way.

    They may make $1000 or more when you set up the structure, and then your tax returns will cost much more every year from then on. So even if you end up paying a little less tax, it will be very likely that you’ll be paying more overall at tax time.

    I have been operating as a sole trader for 5 years, and I’m far better off this way – I can still claim all of my expenses and split my income with my wife. I can pay super and insurance just like a company can.

    In my (and my acountant’s) opinion, if you’re just a small, home based business, the only real benefit in setting up as a company is to protect your assets. In my case, there is no need for this as all I have is a smashed Daewoo and 2 dogs.

    You really need to find a good accountant who will sit down with you and explain everything to you. Don’t be afraid to shop around.

    I’ve often felt like the accountants I’ve dealt with have just figured like many small businesses, I’ll soon go bust, so they may as well milk me for all I have before then.

    Good luck.

    Not if the OP still has all these questions it wasn’t.

    Thank you!!
    That’s exactly what i meant.
    I felt the accountant i met was really pushing me into forming a company and i didnt want to do it just becuase he said so.
    And honestly, the service charge he offered was quite a lot for me and especially for the business just launched, it seems way over.

    it was way over only to save some tax.

    Our business is also unlikely run into risking our own asset.
    We don’t rely on credit and we don’t have to put out own asset to risk to run business. i guess that’s the point i get really suspicious for that accountacnt.
    After explaining everything, all condition, current status of business, direction we want to go with business, he is still insisting PTY LTD.

    he showed us the amount of tax for both sole trader(individual tax) and company tax(30% of income) and there were big difference between them.
    I need to look into it bit further but, still…..doubt it.

    Anyway.
    thank you so much.

    2 dogs are very important asset!
    and daewoo is not worth it. ( no offence, i am from korea. :))

    #1060651
    RapidEntryBiz
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    I’m pleased that you’re doing some research of your own. It sounds like you were a little disadvantaged by your lack of understanding of the issues involved when you met with your advisor. MYOB’s advice to contact the ATO may appear to be worthwhile but they too, have an agenda as StellarScott pointed out.
    Business Structures 101 is in your future.Try a Google search but remember to try a few different search strings and read a few articles not just one, to get a feel for what its all about. My advice is to arm yourself with knowledge and THEN talk to an advisor, then you’ll be able to ask him pertinent questions and you wont feel that he’s tallking over your head so much.

    I’m an advocate of small business not jumping onto the corporate band wagon (forming a company, a Pty Ltd) without giving it some thought first. It can be the most difficult and expensive structure to unwind, if you find yourself in that position.

    Cheers
    Dianne

    #1060652
    taxpert
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    Hi Heather,

    Choosing a business structure is a very important decision that could ultimately save or cost you many thousands of dollars. Seeking professional advice is something I would strongly recommend to anybody in your situation and $190 (a not unreasonable amount) is money well spent in the long run.

    I don’t know enough about your situation to provide specific advice but you should consider

    Taxation rates (30% vs individual marginal rates) – at a certain point of income a company will save you tax but at lower incomes a sole trader could actually be better

    Ability to divert some of the income to your own name via wages, dividends etc

    Protection of assets/legal liability – company’s can offer advantages in this regard due to the ‘corporate veil’. This in turn could assist in…

    Ability to raise funds to finance and grow the business

    Ease of selling when the time comes and

    Of course the associated costs.

    This list certainly isn’t exhaustive.

    Remember also, as Dianne pointed out, that keeping the sole trader structure now doesn’t lock you in forever.

    #1060653
    LaurenL
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    For the time being, Sole Trader (or Partnership) business structure is the better option for your situation.

    While your husband is running a general trading business, the income is not PSI as he is not providing his skill, knowledge, expertise or effort. He can split the reasonable amount of his income with you for the work you perform for the business such as attending phone calls, issuing invoices, etc as it doesn’t break anti-avoidance law.

    In terms of expenses you mentioned on the post, as long as they are business related and the expenses are for income generation, they are deductible. However, there are certain types of expenses are not tax deductible. Please take a look at the print out of Guide for Sole Trader from ATO website http://www.ato.gov.au/content/downloads/bus00167664n72511072010.pdf

    Good luck.
    Regards

    Lauren

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