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  • #977868
    MissMoo
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    Hi All,

    I have recently started my own business (sole trader) as a pet sitter. Because I am still in the start up stage, I am still working full time in retail while I get my business up and running.
    I am not 100% sure about my tax obligations, I have booked a session with the ATO to get advice, but in the meantime… does anyone out there have any information. The thing I’m worried about is, will my new business be classed as a 2nd job? therefore I’ll be paying a high tax rate? :confused:
    Would be interested to hear if anyone has been in a similar situation.

    #1102471
    MyGreatIdea
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    Any earnings you make as a sole trader are added to your earnings as an employee to give a total annual income. You will pay tax for the year based on these total earnings, less any allowable deductions for your business.

    Wendy :)

    #1102549
    MyGreatIdea
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    Any earnings you make as a sole trader are added to your earnings as an employee to give a total annual income. You will pay tax for the year based on these total earnings, less any allowable deductions for your business.

    Wendy :)

    #1102473
    MattR
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    Hi MissMoo

    Good luck with the business. My sister uses a sitter and loves the service.

    With respect to the ATO – remember that whilst the advice they give you will be correct, their job is to protect commonwealth revenue, not maximise your cashflow.

    #1102551
    MattR
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    Hi MissMoo

    Good luck with the business. My sister uses a sitter and loves the service.

    With respect to the ATO – remember that whilst the advice they give you will be correct, their job is to protect commonwealth revenue, not maximise your cashflow.

    #1102475
    Past-Member
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    Couple It is correct. Your earnings are added together with a sole trader for tax reasons. You can only make deductions against your various incomes if they were to that income only – i.e. you can’t deduct pet business expenses against your main job income, only against your business. At the end of the tax year and your annual tax return, the ATO will send you a PAYG statement saying whether they estimate that you have to pay tax in advance on projected earnings, payable 3 monthly at the same time as the BAS for those registered for GST.

    Also, at present you must turnover at least $20K in your business to be able to make deductions from it. However, those deductions can be carried over for the next couple of years whilst you are in startup phase, to be deducted later. This is why you need an accountant to help you get things correct. It’s worth it. All accountant fees are tax deductible regardless.http://www.flyingsolo.com.au/forums/money-matters/19210-tax-question.html#

    Also, now is a good time to set up a separate savings account to put aside ‘tax’ for yourself as compulsory saving. If you don’t need to use it at the end of the financial year, it will become a bonus for you. If you do need it for PAYG, then you will have no worries. Save from 20-30% in that account from extra earnings profit.

    Make sure you like and can talk to your accountant and feel confident in their communication with you and your business needs.

    All the best.

    PS this is not tax advice. Please always check with ATO or your accountant.

    #1102553
    Past-Member
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    Couple It is correct. Your earnings are added together with a sole trader for tax reasons. You can only make deductions against your various incomes if they were to that income only – i.e. you can’t deduct pet business expenses against your main job income, only against your business. At the end of the tax year and your annual tax return, the ATO will send you a PAYG statement saying whether they estimate that you have to pay tax in advance on projected earnings, payable 3 monthly at the same time as the BAS for those registered for GST.

    Also, at present you must turnover at least $20K in your business to be able to make deductions from it. However, those deductions can be carried over for the next couple of years whilst you are in startup phase, to be deducted later. This is why you need an accountant to help you get things correct. It’s worth it. All accountant fees are tax deductible regardless.http://www.flyingsolo.com.au/forums/money-matters/19210-tax-question.html#

    Also, now is a good time to set up a separate savings account to put aside ‘tax’ for yourself as compulsory saving. If you don’t need to use it at the end of the financial year, it will become a bonus for you. If you do need it for PAYG, then you will have no worries. Save from 20-30% in that account from extra earnings profit.

    Make sure you like and can talk to your accountant and feel confident in their communication with you and your business needs.

    All the best.

    PS this is not tax advice. Please always check with ATO or your accountant.

    #1102477
    Captain Scarlet
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    KarenC, post: 114367 wrote:
    Also, at present you must turnover at least $20K in your business to be able to make deductions from it. However, those deductions can be carried over for the next couple of years whilst you are in startup phase, to be deducted later.

    Hi Karen,

    I have a question regarding your post. Is that right that you can only claim deductions if you have a turnover of more than $20K? I’ve read a bit about deductions and I’ve never come across that. I am a sole trader. Can you point me to a link that states this?

    Thanks

    #1102555
    Captain Scarlet
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    KarenC, post: 114367 wrote:
    Also, at present you must turnover at least $20K in your business to be able to make deductions from it. However, those deductions can be carried over for the next couple of years whilst you are in startup phase, to be deducted later.

    Hi Karen,

    I have a question regarding your post. Is that right that you can only claim deductions if you have a turnover of more than $20K? I’ve read a bit about deductions and I’ve never come across that. I am a sole trader. Can you point me to a link that states this?

    Thanks

    #1102479
    Past-Member
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    Re: tax question – ATO LINKS


    @Captain
    Scarlet – as I mentioned, I am not a tax person, but a family member went through all of this recently and found it to be true that you have to turnover at least $20K which is one of the four ‘am I in business’ tests.

    Here are some links to read at the ATO.

    By having a good accountant, if you are below the threshold, they will be able to hold over expenses up to 3 years I think to be deducted then as the business improves.

    Of course, keeping careful records is essential.

    Cheers.

    ATO LINKS
    Income and deductions for small business

    the assessable income from your business is at least $20,000 in the income year
    http://www.ato.gov.au/businesses/content.aspx?menuid=0&doc=/content/45518.htm&page=41&H41

    Guide to non-commercial losses
    Income requirement and business tests
    You can offset a loss from your business against your other income if you meet the income requirement (broadly, that your income for non-commercial loss purposes is less than $250,000) and your business passes one of these tests:
    It produces assessable income of at least $20,000.
    It has produced a profit in three of the past five years (including the current year).
    It uses real property or an interest in real property worth at least $500,000 on a continuing basis.
    It uses other assets worth at least $100,000 on a continuing basis.
    When you calculate your business income or loss, combine all income and deductions from foreign and Australian sources that are attributable to the same or similar business activity.
    http://www.ato.gov.au/content/00268103.htm

    Also read

    Non-commercial losses – home page

    http://www.ato.gov.au/businesses/pathway.aspx?sid=42&pc=001/003/068

    Note: Please check all tax matters with your accountant or the ATO.

    .

    #1102556
    Past-Member
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    • Total posts: 1,815
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    Re: tax question – ATO LINKS


    @Captain
    Scarlet – as I mentioned, I am not a tax person, but a family member went through all of this recently and found it to be true that you have to turnover at least $20K which is one of the four ‘am I in business’ tests.

    Here are some links to read at the ATO.

    By having a good accountant, if you are below the threshold, they will be able to hold over expenses up to 3 years I think to be deducted then as the business improves.

    Of course, keeping careful records is essential.

    Cheers.

    ATO LINKS
    Income and deductions for small business

    the assessable income from your business is at least $20,000 in the income year
    http://www.ato.gov.au/businesses/content.aspx?menuid=0&doc=/content/45518.htm&page=41&H41

    Guide to non-commercial losses
    Income requirement and business tests
    You can offset a loss from your business against your other income if you meet the income requirement (broadly, that your income for non-commercial loss purposes is less than $250,000) and your business passes one of these tests:
    It produces assessable income of at least $20,000.
    It has produced a profit in three of the past five years (including the current year).
    It uses real property or an interest in real property worth at least $500,000 on a continuing basis.
    It uses other assets worth at least $100,000 on a continuing basis.
    When you calculate your business income or loss, combine all income and deductions from foreign and Australian sources that are attributable to the same or similar business activity.
    http://www.ato.gov.au/content/00268103.htm

    Also read

    Non-commercial losses – home page

    http://www.ato.gov.au/businesses/pathway.aspx?sid=42&pc=001/003/068

    Note: Please check all tax matters with your accountant or the ATO.

    .

    #1102481
    Captain Scarlet
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    • Total posts: 20
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    Hi Karen,

    Thanks for the link.

    Don’t worry, I’m not a tax person either (you’d never guess!) so I take the information in the good faith it is given.

    With regards to the link. I believe, and someone may want to correct me, but it seems that this is only the case if you try to offset a business loss against your normal income.

    In the link it said:

    “You can offset a loss from your business against your other income if you meet the income requirement (broadly, that your income for non-commercial loss purposes is less than $250,000) and your business passes one of these tests:

    It produces assessable income of at least $20,000.”

    So, I read that the $20,000 income test is only applicable if trying to offset a loss. As stated before, I read quite a bit about tax deductions and I’ve never come across this before, but then again I haven’t been looking at declaring a loss (as my business makes a profit).

    It would be good if any of the forum members who are a bit more tax savvy could confirm this.

    Thanks for taking the time to reply.

    #1102558
    Captain Scarlet
    Member
    • Total posts: 20
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    Hi Karen,

    Thanks for the link.

    Don’t worry, I’m not a tax person either (you’d never guess!) so I take the information in the good faith it is given.

    With regards to the link. I believe, and someone may want to correct me, but it seems that this is only the case if you try to offset a business loss against your normal income.

    In the link it said:

    “You can offset a loss from your business against your other income if you meet the income requirement (broadly, that your income for non-commercial loss purposes is less than $250,000) and your business passes one of these tests:

    It produces assessable income of at least $20,000.”

    So, I read that the $20,000 income test is only applicable if trying to offset a loss. As stated before, I read quite a bit about tax deductions and I’ve never come across this before, but then again I haven’t been looking at declaring a loss (as my business makes a profit).

    It would be good if any of the forum members who are a bit more tax savvy could confirm this.

    Thanks for taking the time to reply.

    #1102483
    MissMoo
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    • Total posts: 3
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    Thanks for all the replies, but I think I’ll book in to see an accountant, as everything is still a little unclear to me. And since I’m not the most savvy person around at this side of things… I need the help of a professional :)

    #1102561
    MissMoo
    Member
    • Total posts: 3
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    Thanks for all the replies, but I think I’ll book in to see an accountant, as everything is still a little unclear to me. And since I’m not the most savvy person around at this side of things… I need the help of a professional :)

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