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  • #967314
    Masroo
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    What are the chances of labor bringing in this in? It has shaken me a bit as to how to structure. To me it looks like big bad news and further headache. I know there has been a lot of pandering to the unions, but this seems like a big leap. Surely it will be quashed before it sees the light of day. Can anyone explain the ramifications of this further?
    Unsure of which forum section to put this in but thought it would be wise for any start ups to consider.

    In a nutshell, what happened was the Board of Taxation came up with a series of outrageous recommendations and Sherry – instead of saying that these recommendations were against ALP policy and that they would send small business into chaos – gave them his blessing and even thanked the unions for their input. Sherry has sent them off to the Henry Committee for review (Full coverage: Henry tax review).

    So here are just a few of the ideas that Sherry now has on his agenda.

    Each plumber or computer consultant in Australia will need to differentiate between their income from capital (spanners, shovels and computers) and their income from labour (digging the ditches and writing software).

    Under the Sherry-blessed plan, part of the income derived from labour would be attributed to the person who supplied the labour and those people would be treated as employees – not business people. The income earned on capital could be returned to the owner(s) of the capital, which may differ from the person who provided the labour. Have you ever heard of anything more stupid? But the Sherry-blessed plan gets worse.

    The plumber and computer person must make an annual report to the ATO so that the ATO can match data to see how many clients they have had in a year. If more than 80 per cent of the business income came from one group then whammo! You are an employee.

    And once the plumber and computer consultant are deemed to be employees, all their business deductions will be looked at in a different light. Their customers may be required to deduct tax when they pay the invoice.

    And, oh yes, every business must have two employees to be a business.

    There are a lot more crazies being considered

    http://www.businessspectator.com.au/bs.nsf/Article/One-man-can-make-Abbott-PM-pd20100303-36RPT?OpenDocument&src=sph&WELCOME=REGISTERED OK

    (free to registar to read the rest of it)

    #1025386
    Solo Lawyer
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    Dear Masroo

    I’m not a tax expert but I think that those change have already been introduced. It sounds very much like Personal Services Income or PSI – see http://www.ato.gov.au/businesses/pathway.asp?pc=001/003/092

    As a solo lawyer I had to work out whether the rules applied to me in my businesses last tax return. Needless to say the rules are very complicated with about five different tests to apply to determine if you have PSI.

    Bye

    Michael Terceiro
    Solo Lawyer
    http://www.terceiro.com.au

    #1025387
    Accountix
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    • Total posts: 33
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    Masroo

    I’m not a tax expert either however it does sound a lot like personal services income as Michael has stated.

    However the part of the quote:

    “Each plumber or computer consultant in Australia will need to differentiate between their income from capital (spanners, shovels and computers) and their income from labour (digging the ditches and writing software).”

    sounds very unusual. Income from capital is generally concidered returns like dividends and interest on investments, which is separated out on a tax return already.

    Could you please supply where you got the material you quoted from, so we can go read the entire article.

    Shane Holbeck – Accountix
    http://www.accountix.com.au

    #1025388
    Masroo
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    Accountix, post: 29987 wrote:
    Masroo

    I’m not a tax expert either however it does sound a lot like personal services income as Michael has stated.

    However the part of the quote:

    “Each plumber or computer consultant in Australia will need to differentiate between their income from capital (spanners, shovels and computers) and their income from labour (digging the ditches and writing software).”

    sounds very unusual. Income from capital is generally concidered returns like dividends and interest on investments, which is separated out on a tax return already.

    Could you please supply where you got the material you quoted from, so we can go read the entire article.

    Shane Holbeck – Accountix
    http://www.accountix.com.au
    Yes, I’m not to sure if they are saying that the test will be changed or what? Does not seem to be enough info in that regard. Or if it is just a scare campaign from a labor hater
    The link is underneath the quote on first post (free to join).
    Also here: http://www.businessspectator.com.au/bs.nsf/Article/One-man-can-make-Abbott-PM-pd20100303-36RPT?OpenDocument

    Also this here, which is what is already in place I thought? From this source (same author) http://www.businessspectator.com.au/bs.nsf/Article/Chaos-looms-for-SMEs-pd20100304-37SK2?OpenDocument&src=rab

    In the Business Spectator Conversation, two readers said their accountant advised them that if more than 80 per cent of their business came from one client they would be regarded as an employee. I must advise those people that they should consider changing their accountant. Assuming the facts were as described, the accountants’ advice was simply wrong or badly explained because as set out above, it is the results test that is the first hurdle that any business must pass. The 80/20 rule is not in the results test and is in the second layer of testing for those that fail the results test.

    So what is he saying that the results test (first hurdle) will be done away with? The info stops short. It’s a bit of a half assed article, but raises a couple of prickly points.

    And, oh yes, every business must have two employees to be a business.

    Any thoughts on this? Once again it does not go into enough detail.
    I wonder where he is getting his info?

    #1025389
    Chris Bates
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    What a crock – I thought the government wanted to make tax easier for the average person. This is just one more reason why I’m going to need to pay a bookkeeper!

    #1025390
    JohnSheppard
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    Mr Rudd talks sloooowwwwly, becauusee we’reee all stuuupiid….

    But I’m sure it’s not an attack, they do want to get voted back in you know…The title of this thread read’s like an ACA/Courier Mail headline….we all love their standard of journalism don’t we?

    Consequently I flicked off, put the paper down and don’t know what you’re talking about….

    #1025391
    Masroo
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    john.sheppard, post: 30019 wrote:
    Mr Rudd talks sloooowwwwly, becauusee we’reee all stuuupiid….

    But I’m sure it’s not an attack, they do want to get voted back in you know…The title of this thread read’s like an ACA/Courier Mail headline….we all love their standard of journalism don’t we?

    Consequently I flicked off, put the paper down and don’t know what you’re talking about….

    Nice to see in tradition of ACA you carried the flame without actually addressing anything in the post. I’m not interested in a lib & labor flame war. I’m interested in what was brought up in the article.

    #1025392
    James Millar
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    The Henry Tax Review is going to come out with a significant number of left field ideas / suggestions. These will be reviewed by the ALP and no doubt some will form the basis of their “tax reform” plan. The vast majority will be so politically impossible that no party will endorse them (unwinding negative gearing, scrap main residence CGT exemption – that sort of stuff).

    Its another serious waste of taxpayer resources even undertaking the review. The ALP are so dead set on tax reform and in my experience that means more compliance rather than less (despite their objectives it never gets easier) – this will impact both business and individuals.

    Hopefully voters will hold them accountable if they go down that road.

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
    #1025393
    JohnSheppard
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    Masroo, post: 30057 wrote:
    Nice to see in tradition of ACA you carried the flame without actually addressing anything in the post. I’m not interested in a lib & labor flame war. I’m interested in what was brought up in the article.

    I was addressing the headline. I don’t care about labour or liberal either. I just like to have headlines that don’t put bias on whatever is contained. Anyway, thats off topic, sorry and I should of kept quiet.

    #1025394
    sixx
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    JohnSheppard, post: 30062 wrote:
    I was addressing the headline. I don’t care about labour or liberal either. I just like to have headlines that don’t put bias on whatever is contained. Anyway, thats off topic, sorry and I should of kept quiet.

    I thought yor answer was appropriate.

    The initial question was “What are the chances of labor bringing in this in?”

    Your answer (in a round about kinda way) was ‘zero chance’.

    I have to agree. Probably best to just let slip into the swampy backwaters never to seen again like most Labor policy.

    Hysteria such as this thread only aid in momentum.

    #1025395
    Masroo
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    sixx, post: 30065 wrote:
    I thought yor answer was appropriate.

    The initial question was “What are the chances of labor bringing in this in?”

    Your answer (in a round about kinda way) was ‘zero chance’.

    I have to agree. Probably best to just let slip into the swampy backwaters never to seen again like most Labor policy.

    Hysteria such as this thread only aid in momentum.

    I’m sorry not PC enough so change initial question too “What are the chances of this getting in from unspecified government body”
    And change the title to “Small Business concern” (I cut and paste the original title from another forum and changed it slightly. Sorry I was feeling lazy at the time)

    The reason I am interested is in concern for any upcoming red tape. I am currently looking at expanding my construction company so want to allow for any nasty surprises in my worst case scenario plan. Considering I will have subbies it is better to enquire about this issue now and how credible the information is (and even just to understand what outcome it may have on the way I do business). Construction can be a headache at the best of times and is best to keep up with any upcoming changes.

    And as far as either Government not bringing in this sort of thing (or a bastardized version), then you sure trust em more then I do. But yes currently during an election year this would have little chance of being acknowledged let alone brought in.

    PS anyone that finds this post offensive to their political sensibilities, then I will happily beige it up.

    #1025397
    James Millar
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    Early indications are that the ALP are ordinary in delivering on their proposed reform. Last year being their first budget and (for example) proposed amendments Division 13A regulating employee share schemes were a farce. The end result after much energy, effort and money was that the final legislation was watered down to be essentially the same as what we had. Big song and dance at the May budget and ultimately no substance. Sure it’s one example but I fear it’s a sign of things to come.

    It’s not bashing ALP – just facts so far. Hopefully the Henry tax review is not well supported by either party.

    Often these things are introduced quietly in an attempt to keep them under the radar. Trust me in saying that further tax reform is not a good thing at the moment.

    Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900
    #1025398
    kathiemt
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    I have permission from the author (Lyn) to repost this – it’s being discussed at my Virtual Assistants forum but applies to anyone who is classed as an IC. I encourate you to read Lyn’s blog (linked below) and also the subsequent post she’d put up since relating to further things. This is a real concern.

    Hi all – this is longish but important for our industry.

    As promised here are my findings post-Small Business Summit in Brisbane in early July and my attempts to find out more about what’s going on with any proposed changes to the personal services income criteria that were alluded to at that summit. For the past four weeks I’ve been trying to get ministers on both sides of the fence to give some idea of what is proposed and also what we – as an industry – can do to have a voice on any changes.

    The ALP minister is dead silent. I was only able to get a response from the office of the proposed LNP Minister for Small Business Bruce Billson.

    After wading through the 54 page Board of Taxation review that was commissioned by the ALP in 2009 I’ve put together a blog post that kind of summarises what the key issues are for virtual assistants – because we are directly affected by any changes to PSI criteria.

    In layman’s terms: at the insistence of the major unions after the 2007 election, and despite a pre-election promise not to change PSI criteria, the ALP commissioned a review by the Board of Taxation. The review was requested because unions believed that too many contractors were taking advantage of the criteria as they currently exist and the legislation needed to be tightened up. The ALP has rejected some of the changes proposed but there are many that they refuse to publicly give their position on. Whilst the legislation primarily focuses on alienation of personal services income through the use of company and trust structures, the proposed changes actually capture everyone who derives an income from personal services … including virtual assistants. They recommend changes to the criteria that directly affect us as independent contractors.

    I’ve tried to summarise the results of my investigation in a blog post that you’ll find here:
    http://blog.execstress.com/2010/08/psi-criteria-changing-or-not/

    If all the outstanding change recommendations by the review are adopted, it will effectively mean that VAs (and many other independent contractors) will for the purposes of taxation be viewed as employees.

    I’ve tried to keep it apolitical. But unfortunately the facts are that if the ALP moves forward with their proposed changes, our industry is at serious risk of collapsing and thousands of home-based VAs will potentially be looking for work in the open labour marketplace.

    It is very important that before 21 August you take the time to get informed about the policies of both sides before making your decision. Unfortunately PSI isn’t a glamorous headline like the mining tax – or the return from the political wastelands of the prodigal son. But it IS going to affect each and every one of us.

    There is a link in my post to the Independent Contractors Australia site and a letter that was drafted to then PM Rudd. This letter could be used to send to your local ALP minister asking them what is proposed. Putting pressure on them now is the only thing we as an industry can do to have a say.

    If you’re in Brisbane, both Small Business ministers (Bruce Billson and Craig
    Emerson) will be attending a meeting being help by Terri Cooper through the Australian Small Business Group. She has been given a copy of my findings and this will be a great opportunity to get our concerns across to the two who matter most. The meeting is 10 August 6pm to 8pm at the Colmslie Hotel and is
    free: http://australiansmallbusinessgroup.com.au/forum.php

    Please pass the blog post on to independent contractors you know. I’m also sending it off to media here and am happy for any of you with contacts in the media to do the same. The only way we can have a voice and be involved in the continuation of our industry is to be the squeaky wheel!

    Cheers
    Lyn

    #1025399
    Burgo
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    What a great way of getting rid of small business.

    Want to stay in business it is up to you.

    All I will say is dont waste your vote.

    #1025400
    peppie
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    10 points to those who have done their homework on this and not just called it headlining, because it seems to me that despite the headlines there is likely a story in there somewhere.

    Not wishing in any way though to detract from this story (which certainly seems worth watching out on), I am reminded of a quote by US Senator Eugene McCarthy which goes something like “the only thing that saves us from bureaucracy is it’s inefficiency”.

    A while back in NSW it was to be introduced that every building trade licensee would be required to earn a certain number of points over a rolling period to retain a license. The points would be earned by attending training courses, being a member of a trade association and even subscribing to a trade journal. The scheme did start in certain trades and as a holder of an electrical contractors license I was informed would soon apply to me.

    My greatest concern was that I only really used the license these days as part of my own work and the extra training etc. was not needed. Funny thing though, the scheme quietly died, probably I am guessing because there was no money to pay for it.

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